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MARKET DOWN, VOLATILITY UP = NOTHING NEW

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MARKET DOWN, VOLATILITY UP = NOTHING NEW

By Mike Parnos

It wasn't pretty, and I wasn't surprised by Friday's market action. The market seemed to chill out for a few sessions and we calmed down a bit. It was too good to be true. When it butted its head up against resistance, Mr. Fear reared his ugly head and drove the S&P down with a vengeance.

Isn't our style of non-directional trading great? A huge daily loss like that and we don't even blink. Sure, we have our share of problems from time to time, but not particularly often. But, can you imagine having a portfolio of $250,000 in stocks and watch as the nickels, dimes and dollars disappear before your very eyes -- leaving you with a portfolio value of $235,000 by day's end -- with more downside to come.

How many traders out there have a clue on how to protect their portfolios? Damn few, sadly. Even if they do know the concept, many sit idly by and watch their net worth dwindle away instead of implementing the strategies.

At my seminars, we often have a segment called Trader's Anonymous -- in which each traders stands up and confesses a bad trade. We then analyze what went wrong. You wouldn't believe some of the reasons we hear the lame excuses as to why the trader didn't act to prevent a huge loss.


Actually, we've all been there and it's a lot of laughs. Most of all, it's a great instructional tool. I get a lot of feedback from seminar graduates who have "seen the error of their ways" and who now know what to do when the shit hits the fan -- and they do it.

It's always great to put on a trade and have it expire 100% profitable. However, some of the best trades I've ever made were to close out a losing trade and turn it into a potential winning trade. It's a skill, along with portfolio management, too many traders take for granted. It's something we literally spend hours discussing at my two-day advanced seminar.

Good News & Good News
There is good news and then there is more good news. First, we have a huge cushion on our March positions - 180 & 190 points on our SPX positions and 145 points on the Russell.

Secondly, the added volatility could very well provide us with better opportunities for April positions. I'd love to be able to establish bull put spreads at levels similar to our March positions. We'll have to see how much further the market comes down and see what's available.

There are a lot of economic numbers due out this week. The market will focus on them and we'll likely see more downside. It seems likely that, at some point, the market will test the January lows. On the S&P that would be about 1270. I'm not anxious for it to get down that far. 1300 would be just fine with me, but then, the market goes where ever the hell it wants. Thus far in my trading experience, it's never called to ask me where I think it should go.

There are not a lot of bulls out there. Obviously, there is still a lot of work to be done. The economy is fading fast, people are losing their homes, gasoline prices are rising and there aren't any quick-fix solutions. We'll just ride it out and do the best we can to come away from it all with a few dollars in our pockets.

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S&P 500 Support & Resistance -  Closed at 1330.63
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 1384
1396 is the January 2008 peak
1406 is the August and November 2007 closing low
1415 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
The 200 day SMA at 1471
1474 is the June/July 2006 up trendline
1475 from peaks in December 1999 and January 2000

Support:
1325 from May 2006 peak prior to the summer 2006 correction
1317 is the early February low
1316 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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NEWARK - March 15th & 16th
I will be presenting a two-day advanced CPTI seminar in New Jersey (Newark) on Saturday and 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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CPTI MARCH POSITIONS
CPTI March Position #1 - RUT Bull Put Spread - 686.18
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 - 1330.63
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.

CPTI March Position #3 - SPX Bull Put Spread - 1330.63
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 - 1330.63
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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BEGINNING YOUR OPTIONS EDUCATION . . .
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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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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