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WATCHING THE MARKET MAMBO “ FROM A DISTANCE

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WATCHING THE MARKET MAMBO - FROM A DISTANCE

Hello again from the Philippines. It's different being here and not exposed to US business television programming. I rarely get to hear the talking heads on CNBC or Bloomberg. All I see are the tick-by-tick streaming quotes from the market day - and that is IF I am up in the middle of the night. So, I watch as the market gyrates, but don't really have much of an idea as to why it's taken wild swings. I end up having to read about it online as the writers guess at what may have caused market reactions.

Friday was a day like most in recent trading - a move in one direction for much of the day, only to be negated by a counter-move in the last hour. At least the counter-moves have brought the market higher the last two days. Friday's last minute reprieve was attributed to short covering after it was rumored that there could be another financial bailout announced early this week. I don't know how much longer it's going to last, however. How many more bailouts can be out there to save the butts of the bulls?

There are still four weeks left in the March option cycle - plenty of time for most anything to happen. Even though we've had a few bullish days, they've been on low volume. If we anticipate this to continue, I think we should look at the possibility of putting on a RUT bear call spread to complete our Iron Condor. Plus, we can consider an SPX bear call spread to complete our Iron Condor.

WHERE SHOULD WE LOOK?

The S&P is at about 1353. If it pops up, I'd seriously consider a bear call spread at the 1455/1465 or 1460/1470 level. It's not there now, but could be.

On the Russell 2000, we could explore the area of 770/780 on a move up. The RUT is at 695. That might be a touch close with four weeks left in March. If you're concerned, you may choose to only trade 10 contracts instead of 20 to reduce your exposure. Or, you may choose not to trade at all - which is perfectly understandable and acceptable.

Although many of you may consider it too soon, if the market rolls over, I'd also be looking for our first April bull put spread position. On the RUT, I'd be comfortable looking in the 570/560 area for April. On the SPX, we might look to the 1180/1170 or 1170/1160 spreads. On Friday, a bunch of new strike prices opened up for April. That should give us a better choice.

The above ideas are just that - ideas. I'm not there watching every tick, so I'm not comfortable in sending out specific plays just yet. But, that doesn't mean that opportunities won't be there for you. Seminar graduates know where to look and what to do when they spot an opportunity.

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S&P 500 - Support & Resistance - Closed at 1353.11
Resistance:
1368 is the high in this recent lateral consolidation
1370 is the August 2007 intraday low
1374 is the March 2007 closing low
The 50 day EMA at 1388
1396 is the January 2008 peak
1406 is the August and November 2007 closing low
1414 is a longer term trendline from the August 2003/September 2004 lows
1430 from the August interim lows
1440 - 1437 from January and March peaks
1459 is the February peak
1473 is the June/July 2006 up trendline
1475 from peaks in December 1999 and January 2000
The 200 day SMA at 1474

Support:
1325 from May 2006 peak prior to the summer 2006 correction
1317 is the early February low
1315 is an ancient trendline
1305 to 1302 from an August 2006 peak and matches a range of support from March and April 2006.
1294 from the January 2006 peak
1288 from June 2006
1280 from June and August 2006
1270 is the January intraday low
1255 from June 2006 lows

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The Stimulus Package

A number of people, including me, had questions about the rebate checks that will be distributed as part of the Stimulus Package. So, I poked around a bit and came up with the answers to some questions that apply to many CPT subscribers.

Question: Will the upcoming stimulus checks be tax-free or not?

Answer: The rebate's not taxable, so you wouldn't report it next year on your tax return. It's also important to know that the rebate won't affect any federal benefits programs such as Social Security or veteran's benefits that the taxpayer might be receiving.

Question: Will the rebate that we're getting be just an advance on our 2008 tax return?

Answer: The amount of the check that they get this year won't reduce in any way the refund they'll be entitled to next year.

Question: Do retired people have to file a 2007 tax return in order to receive the tax rebate?

Answer: If they receive over $3,000 a year in Social Security, they absolutely should file a 2007 tax return because they would also be entitled to a rebate, even thought they don't normally file and even though they don't normally pay any taxes. The similar situation exists for people who receive certain veteran's benefits. As long as they have at least $3,000 of veteran's benefits, they also will qualify.

Question: Do stay-at-home parents earning less than the minimum $3,000 factor in to these rebates?

Answer: On a joint return, you would combine the income, so for instance, the $3,000 qualifying income limitation, that would be the total on the return. It could be earned by the husband, the wife, or some combination.

Question: The full tax rebate applies to couples with incomes under $150,000. Where on the income tax form will we find the number for adjusted gross income?

Answer: It's the very, very bottom number on the front page of the tax return.

The above answers were provided, in a recent interview, by Frank Keith, a spokesperson for the Internal Revenue Service.


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NEWARK - March 15th & 16th
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 get your spot reserved.

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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Beginning The Educational Process . . .

I know there are many trial subscribers out there who may not have the experience or background to fully understand what we're doing here at the Couch Potato Trader. What we do is not for beginners. It's important to have a solid foundation of knowledge of options and how they work to take full advantage of my column.

Some folks see our track record and are excited (justifiably so) to give us a try. A large percentage of these folks are completely new to options. I'm sure you know a few. We want to make the learning process both smooth and enjoyable.

I have recently agreed with OptionInvestor to teach a two-day introductory options course. We're calling it "Up To Speed." It will start from the basics and go through all the information you would need to comprehend options, what they are, how they work individually and together.

After the two days of education, you'll be able to appreciate, and take advantage of, all the newsletters offered on the OptionInvestor site. The first of the "Up To Speed" seminars will be presented in Chicago on Saturday & Sunday, April 12th & 13th.


OptionInvestor is offering these two days of training for as little as $495 - an unbelievable offer. Here is the link to a page that goes into more detail about the "Up To Speed" seminar: www.optioninvestor.com/account/sm08landing.aspx?


Some of you may be interested in a review. Perhaps you know some people who are envying your results from our Couch Potato Trader, but they're intimidated by option trading. This is a great way for them to get "Up To Speed."

As you know, this stuff isn't rocket science. However, it's important for new option traders to have this fundamental knowledge -- or they can kiss their money goodbye.

So, come join me for a couple days of enlightenment and fun. It's a great way to begin one's option education and an experience you'll remember for a long time.

Please Note
Don't confuse the "Up To Speed" seminar with my CPTI 2-day Advanced Seminar. In the "Up To Speed" seminar, we will be covering the basics and discussing the strategies a new option trader should know.

My 2-day Advanced Seminar starts where the "Up To Speed" seminar leaves off. Those who attend my advanced seminar are there to learn and fine tune their trading skills. It's for those who want to explore more advanced trading strategies further in depth.

Take care and I hope to meet many new friends in the "Up To Speed" seminars.

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CPTI MARCH POSITIONS

CPTI March Position #1 - RUT Bull Put Spread - 695.43

On 1/22, with the RUT at about 670, we sold 20 RUT March 540 puts and bought 20 RUT March 530 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.

CPTI March Position #2 - SPX Iron Condor - 1353.11

On 1/28, with the SPX at about 1330, we sold 10 SPX March 1150 puts and bought 10 SPX March 1140 puts for a credit of $.50 ($600). Then, we sold 10 SPX March 1490 calls and bought 10 March 1500 calls for a credit of $.55 ($550). Total net credit is $1.15 ($1,150). Maximum profit range is 1150 to 1490 (340 points). This is the first part of what we anticipate will be a 20 contract position. We plan to scale in and enter the second ten contracts in the near future.

CPTI March Position #3 - SPX Bull Put Spread - 1353.11

On 2/6, with the SPX at about 1342, we sold 20 SPX March 1140 puts and bought 20 SPX March 1130 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 July profits, our new cash total is $58,660 ($56,560 $2,100).

ZERO PLUS POSITION - SPX - 1353.11

On 2/6, with the SPX at 1342, we sold 30 SPX March 1140 puts and bought 30 SPX March 1130 puts for a credit of $.60 ($1,800). Maintenance is $30,000. We'll look for a bear call spread to complete the Iron Condor - IF it makes sense.

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SEMINAR DATE -

NEWARK, NJ - MARCH 15 & 16

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!

58 OUT OF 63 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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