Option Investor
Updates

A LITTLE EXPERIMENT

HAVING TROUBLE PRINTING?
Printer friendly version

Thanks to those who emailed me about my last two columns that were devoted to a discussion, and an example of, the calendar spread. I'm glad you enjoyed the explanation and found it easy to understand.

I heard from a few happy campers who put on a bearish calendar spread on AAPL (the bullish people haven't been in touch yet J ). The bearish traders felt that perhaps AAPL had gone too far too fast and was due for a rest. They are trying to trade directionally, but conservatively - using premium decay to put money in their pockets. Let's hope that they are still happy as the January expiration approaches. Let's also hope they don't get greedy and that they do have the sense to lock in a nice profit if/when they have the opportunity.

Monday's New CPTI Position
It was just too great a temptation. I know we'll have to wait another 6 weeks to February expiration, but I couldn't resist. I noticed the February SPX 1300/1290 bull put spread, tossed out a few orders, and was quickly filled in various accounts for $.60. By looking at the option chain, one would have thought there would have been an initial debit of $.20 on the spread. We know better than that, don't we? Or, by now, you should.

By using our bid/ask negotiation skills I could see that there was reasonable premium to be had - and I snatched it - along with a 172-point cushion (at the time). And so did a lot of Couch Potato subscribers. The cushion is a bit less now, but still comfortable.

Those who were paying attention to the volumes on the 1300, 1290 and 1280 SPX options, noticed that there were over 2,200 contracts traded. Shortly after the trade was posted, the market headed down and many CPTI regulars, who recognized the opportunity, increased the net premium they asked for and were filled at $.70. Those extra dimes come in handy. A little heightened awareness brought them an additional $200 on a 20-contract position.

There is another segment of CPTI students, likely seminar grads, who took advantage of the downward market move to adjust down a strike. I received emails from many who were filled at $.60 for the SPX 1290/1280 bull put spread. There were 250 contracts of the 1280 puts traded, so more than just a few took advantage of the opportunity. The extra ten points of safety provides that much more peace of mind - especially for the conservative trader.

That's why I continue to reiterate that the trades I suggest and meant to be guidelines. Some choose to fill them as suggested, while others use a bit of creativity in an effort to improve the premium credit or the strikes. We go over that thoroughly, along with the bid/ask negotiation techniques, at my seminars.

Today's Experiment
With the SPX at 1450, I decided to try my luck. Don't worry, I haven't become a gambler. It was just with another of the non-directional strategies in our arsenal. With slightly more than two weeks left in the January cycle, I put on a Siamese Condor in my personal account. I only traded one contract, and here is what I did:

Sold 1 ATM January SPX 1450 put and sold 1 ATM January SPX 1450 call for a credit of $48.80. Then, I went out 100 points in each direction. I bought the 1550 call and the 1350 put for a total of $2.50. That left me with a net credit of $46.30. I just created a profit range of 1403.70 to 1496.30. The closer SPX stays to my short 1450 strikes, the more money I will make.

Now, why would I choose the Siamese Condor instead of just putting on a regular Iron Condor? Because of the profit potential. I might have been able to put on an Iron Condor and take in a buck credit, but I wouldn't likely have had that wide of a maximum profit range. If I would have traded a 10-contract Iron Condor, I would have had a maximum potential profit of $1,000. That's not too bad. The maintenance would have been $10,000.

However, by trading a 1-contract Siamese Condor, I'm using the same $10,000 of maintenance and I have a chance to make a hell-of-a-lot more than $1,000. Those of you who have read my columns, or attended a seminar, know that the maximum profit potential on the above Siamese Condor trade is over $4,600 - with a bit of luck. I'm not holding my breath and have no expectation of the SPX closing at 1450. Might happen, but probably not when I have a trade on.

I know the market is volatile, and there is a reasonable chance it will threaten the profit parameters, but I have a plan. It's nice to have a plan. Actually, it's imperative to have a plan.

I have no intention of holding the position to expiration. I fully intend to let the accelerated time erosion that takes place during the last two weeks prior to expiration do its thing - and GTFO when I have an acceptable profit.

I'll keep track of this Siamese Condor, along with our official CPTI positions, in this column during the next two weeks. Let's see how it goes. I'm still considering including other types of trades in our official portfolio.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

NEW SEMINAR DATE - MARCH 15/16 - NEWARK, NEW JERSEY
I will be presenting a two-day advanced CPTI seminar in New Jersey (Newark) on Saturday & Sunday, March 15th & 16th. Contact me (Contact Support) to reserve your spot - and save $100! (See below for early bird special information).

Join us as we discuss non-directional strategies, trade selection, entry points, exit alternatives, premium negotiation, maintenance alternatives, taxes, and much more - all subjects necessary to enlighten and to maximize your trading business. As you know by now, the seminars usually sell out.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

CPTI JANUARY POSITIONS
CPTI January Position #1 - RUT Bull Put Spread - 745.01

On 12/4, with the RUT at 752, we sold 20 January RUT 620 puts and bought 20 January RUT 610 puts for a credit of $.60 ($1,200). Maintenance is $20,000. We may put on a bear call spread in the future - IF it makes sense.

CPTI January Position #2 - SPX Iron Condor - 1447.16
On 12/10, with the SPX fluctuating, we sold 20 January SPX 1340 puts and bought 20 January SPX 1330 puts for a credit of $.60 ($1,200). Then, we sold 20 January SPX 1630 calls and bought 20 January SPX 1640 calls for a credit of $.55 ($1,100). Net potential profit is $2,300. Maintenance is $20,000.

CPTI January Position #3 - SPX Bull Put Spread - 1447.16
On 12/13, with the SPX at 1472, we sold 20 January SPX 1330 puts and bought 20 January SPX 1320 puts for a credit of $.70 ($1,400). Maintenance is $20,000. We may put on a bear call spread in the future - IF it makes sense.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

CPTI FEBRUARY POSITION
CPTI February Position #1 - SPX Bull Put Spread - 1447.16

On 12/31, with the SPX at 1472, we sold 20 February SPX 1300 puts and bought 20 February SPX 1290 puts for a credit of $.60 ($1,200). Maintenance is $20,000. We will look to put on a bear call spread in the future - IF it makes sense.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

ONGOING STRATEGY - THE ZERO-PLUS Strategy
In the past, I outlined a strategy based on an initial investment of $100,000. At that time, $74,000 was spent on zero coupon bonds maturing in about seven years at a value of $100,000. The principal $100,000 investment is guaranteed. We're trading the remaining $26,000 to generate a "risk free" return on the original investment. We are not compounding our profits by dramatically increasing the number of contracts we trade. With the July profits, our new cash total is $56,560 ($55,060 $1,500).

ZERO PLUS POSITION - SPX Bull Put Spread - 1447.16

On 12/13, with the SPX at 1472, we sold 30 January SPX 1330 puts and bought 30 January SPX 1320 puts for a credit of $.70 ($2,100). Maintenance is $30,000. We may put on a bear call spread in the future - IF it makes sense.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -


SEMINAR DATES -

CHICAGO, IL - JANUARY 26 & 27

NEWARK, NJ - MARCH 15 & 16 (NEW)

The Chicago seminar is filling up nicely. We filled the room twice before in Chicago. I've chosen a hotel convenient to the airport - eliminating the need to rent a car. You simply take the free airport shuttle to and from the hotel -- convenient and easy. The same is true for the newly announced Newark seminar.

Newark Early Bird Special

Take advantage of the early bird special for the New Jersey seminar and save $100. If you complete your reservation by January 31st, you will save $100. My seminar will then cost only $895 (instead of $995).

There are no more retake spots available for the Chicago seminar. If you want to be on the retake waiting list for Chicago, contact me as soon as possible (mparnos@optioninvestor.com).

Take your trading from a "hobby" to a profitable "business." You need the information you'll learn at my CPTI seminar. You'll learn more than the "how to's" of trading our strategies. You'll learn a new lifestyle - one that can last a lifetime.

DO YOU HAVE PROFIT-ABILITY?
It's always a challenge (and a pleasure) for me to have a roomful of bright people who have a passion for, and are excited about, learning. We go over everything imaginable - from the non-directional strategies to the psychology of trading. We cover a lot more than the mechanics. Inquiring minds want to know the whens and the whys -- not just the hows. That way, they're prepared for the best (and the worst) - and know the best way to handle either situation. Contact me and I'll personally call you with all the details.

If you're a SERIOUS options trader, you want to learn the nuances of our advanced non-directional trading strategies and hone your trading skills. Contact me ASAP at mparnos@optioninvestor.com. Send me your phone number. I will personally call you with all the pertinent information. The price is a bargain - ONLY $995.00 -- less than the profit from one Iron Condor trade. Take advantage of the "early bird special" and save $100. You'll have a two-day experience that you'll remember, and profit from, for a lifetime. I limit my CPTI seminars to ONLY 25 ATTENDEES. And, as a bonus, if you attend one of my CPTI seminars, you are entitled to RETAKE the seminar a SECOND TIME at NO CHARGE!

56 OUT OF 61 PROFITABLE MONTHS!!
WANT TO ACHIEVE SUCCESS WITHOUT STRESS?
OF COURSE YOU DO!!
USE OUR CPTI WEALTH-BUILDING TECHNIQUES!

You should definitely attend one of my seminars. With what you learn, you'll see a substantial increase in your trading results. Contact me at: mparnos@optioninvestor.com. If you've already signed up, I'll see you there. If you haven't signed up, what are you waiting for?

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

HAPPY TRADING!
Remember the CPTI credo: Our remote batteries and self-discipline should last forever, but mierde happens. Be prepared! In trading, as in life, it's not the cards we're dealt. It's how we play them.
MIKE PARNOS, Your Options Therapist and CPTI Master Strategist

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Couch Potato Trader Disclaimer
All results reported in this section are hypothetical. While the numbers represented here may have been achieved or beaten by our readers, we make no representation that any individual investor achieved these exact results. The tracking for the plays listed in this section uses closing prices for the day the newsletter is published and it is not meant to imply that any reader actually received those prices (though many often do) or participated in these recommendations (even though many do). The portfolio represented here is hypothetical and for investment education purposes only. It is only an illustration of what type of gains a knowledgeable trader might receive utilizing these strategies. If you don't get close to these results, guess what. It isn't the fault of the strategies.

Couch Potato Trader Updates Archives