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ONE MORE FOR THE GOOD GUYS

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It wasn't pretty, but it was profitable. I wouldn't want to go through this every month, but, considering what the market went through (and what we went through), I think we did pretty well. It's like that old Timex slogan, "We took a licking, but kept on ticking" - to the tune of a $1,010 profit. Our track record has now improved to 57 out of 62 profitable months.

Fortunately, our ongoing "Zero Plus" position was also 100% profitable (narrowly) and put $2,100 into the steadily rising coffers.

To say it was scary is an understatement. I know that many Couch Potato Traders chose to be even more conservative than I when establishing their bull put spreads. They were probably sweating, but not quite as much.

What A Difference A Month Can Make
When I look for potential positions, I like to consider a percentage loss factor. Historically, when the market has dropped about 10%, it has found its footing and started the slow and precarious move back up. Granted, those are just numbers, but we hope that history will repeat itself.

We're not always able to get a full 10% cushion on our positions, but I try to get as much as possible. With the higher volatility, it's been a little easier - and we needed every point of cushion. The chart below shows the settlement numbers from December and January and the percentage of change. You can see that the S&P was right at about 10%, but the RUT was well above at 13.2%.

December January
Index Settlement Settlement Change % Change
S&P 500 1484.76 1333.94 150.82 10.1%
RUSSELL 781.77 678.47 103.30 13.2%
S&P 100 693.57 620.43 73.16 10.5 %
S&P MID 869.54 761.97 108.57 12.5%

Let's go a step further and look at a few other interesting statistics. In last month's wrap-up column (12/23/07), I pointed out how dramatic the Friday morning settlement can change the settlement numbers from the Thursday closing number. Here is that December chart again.

Index Thursday's Close Friday's Settlement Change
RUT 767.54 781.77 14.23
SPX 1460.12 1474.95 14.83
MID 856.21 866.93 10.72

Now, let's look at January's changes. Keep in mind that January (especially this last week) was incredibly volatile.

Index Thursday's Close Friday's Settlement Change
RUT 780.57 678.47 - 2.04
SPX 1333.25 1333.94 .69
MID 758.93 761.97 3.47

Interesting, isn't it? There was huge settlement change in a less volatile environment (December) vs. a relatively small (well below average) change in a high volatility environment (January).

Another point I found interesting -- Friday morning, just prior to the open, the S&P futures were way up, about 13 points. Normally, that would indicate a much higher opening settlement number. But, that wasn't the case, as you can see in the chart above. It's tough to figure, to say the least. It makes me wonder what the hell goes on during those mysterious settlement calculations? The fact that they even keep the Friday morning settlement system has to make one suspicious. If it's obsolete (and it obviously is), why keep it? Someone must be profiting from it big time - someone with a lot of clout. It should be investigated thoroughly, but who's available?

Colombo and Nero Wolf are retired or dead, but Adrian Monk is still active. I think we should give him a call. Even if he doesn't solve it, having him poking around for a few months should drive them crazy. It's only fair.

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Looking Ahead To February
As I said in my Thursday column, I'm going to hold off adding new positions for the February cycle - at least for the time being. The market is simply too fragile right now. The sell-off may not be over.

I received a lot of emails about our lone February position. We're about 25 points away from the short strike price. Those of you who are concerned should be able to get out for about $3. Maybe you can find something interesting (and safer) in March to roll into. I'm going hang on for now, with a month to go. But, if you're going to lose sleep over it, you should GTFO.

Since we have only one position, you should still have a lot of dry powder. It's nice to have the cash. They say that the time to buy is when there is blood in the streets. I agree, but I hope that it's not our blood they're talking about.

The markets will be closed on Monday. It's a welcome rest from the current chaos. In theory, the market should find some footing soon. It might be just a relief bounce in a longer term bear market, but I can't afford to be proud. I'll gladly take it.

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Another News Channel
More talking heads are popping up. The folks at FOX recently introduced the Fox Business Network (FBN). Some of the faces are familiar while others are new. Ever notice how the female centerpiece talking heads also have bodies that speak volumes. The women are becoming more and more attractive. Considering that it's predominantly men who watch these business channels, it's a good tactical move. I'm not complaining.

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CHICAGO and MARCH 15/16 - NEWARK
There's only a week to go to the Chicago seminar and I have a few spots left. Plus, I will be presenting a two-day advanced CPTI seminar in New Jersey (Newark) on Friday & Saturday, March 15th & 16th. Contact me (Contact Support) and get your spot reserved - 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. Don't procrastinate! The seminars often sell out.

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TRACKING CPTI PORTFOLIO RESULTS
Welcome to CPTI portfolio's year number 6! We've just completed the second month (January) of CPTI tracking year number six. Three out of four of our trades were well positioned and ended up 100% profitable. Our profit for the second month of our sixth year was $1,010. In our sixth tracking year, we accumulated a profit of $5,610 ($4,600 $1,010).

RECAP OF JANUARY POSITIONS
(See Position Details in January Summary Below)

RUT Bull Put Spread - PROFIT: $1,200
SPX Iron Condor - LOSS: $1,590 SPX Bull Put Spread - PROFIT $1,400 TOTAL JANUARY PROFIT: $1,010

January Settlement Numbers
S&P 500: $SET - 1333.94
Russell: $RLS - 678.47
S&P 100: OEX - 620.43
MID: $MIV - 761.97


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SUMMARY OF CPTI JANUARY POSITIONS
CPTI January Position #1 - RUT Bull Put Spread - 680.57

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. PROFIT: $1,200.

CPTI January Position #2 - SPX Iron Condor - 1325.19
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. Closed out the bull put spread for $1.95 debit. LOSS: $1,590.

CPTI January Position #3 - SPX Bull Put Spread - 1325.19
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. PROFIT: $1,400.

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CPTI FEBRUARY POSITION

CPTI February Position #1 - SPX Bull Put Spread - 1325.19
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.

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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 January profits, our new cash total is $58,660 ($56,560 + $2,100).

ZERO PLUS POSITION -

To Be Announced 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 was $30,000. PROFIT: $2,100.

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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!

57 OUT OF 62 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?

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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

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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.

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