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MARKET DOWN, BUT NO BOUNCE

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We got spoiled. In recent sessions the market has come down, but later in the day there would be a bounce back up. Today, no bounce. Less than thrilling news is that the SPX broke below support at about 1310. Market looks to be headed down, continuing it's major trend. The 1270 support level from the January lows will be telling - and, hopefully, it won't be telling us goodbye.

Our SPX position and RUT positions are in no immediate danger, but the next two weeks could be very long. Why? The VIX spiked up almost three points - to 27.55. The positive is that it will provide us with a little extra premium as we search for more April positions.

The negative is that, when the VIX goes up, it's like adding more time to the option. I'll explain to you how to calculate it as soon as I figure it out myself. It has to do with the Greeks vega and theta. My broker, Mike Cavanaugh, explained it to me, but I didn't grasp it entirely the first time. I'll get back to you on it.

First April Position
Yesterday (Wednesday), we put on our first CPTI position for April - a bull put spread on the RUT. We took in $.55 on a 20 contract position on the 560/550 bull put spread. In spite of today's 21-point loss on the RUT, we still have over a 100 point cushion and about six weeks to expiration.

Strangely enough, yesterday I was trying to put on a bull put spread on the S&P 500, but was getting no cooperation from the market makers. I changed strikes and changed creit limits, but no cigar. I gave up and changed indexes. Maybe they were being greedy. Maybe they were just constipated. I don't know. But, it happens from time to time. Normally, it's not a problem. Using the negotiation strategies I teach at the 2-day seminar, I calculate a reasonable credit limit and put out the order.

Hypo Short Straddle
Well, it seemed like a good idea at the time - and it may still turn out just fine. Earlier today, I proposed a hypothetical short straddle position on the SPX. We sold two contracts of the (then ATM) March 1325 puts and calls and took in 52 points. That created a nice large 104-point profit range for us - or so it seemed at the time.

Today's big down day ate up about 22 of our 52-point downside cushion. We have about 30 points left - which could disappear tomorrow if the market doesn't take kindly to Friday's jobs number.

Today's VIX spike is a negative in this situation, creating a greater obstacle for us. How? Well, one of the ways we use to profit on these short straddles is to take advantage of the increased time decay that is supposed to take place in the last two weeks of an option's life. The higher the volatility, the longer it takes for options to decay.

I was hoping to perhaps close out this position for a quick $500 - $800 profit in maybe four days. Now, we'll have to be more patient - even if the market consolidates at this level. If the S&P moves back up, and takes out some of the volatility with it, we'll be in much better shape. If the market continues downward, we may have to adjust (or close) our straddle.

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An Explanation
Once upon a time in a village, a man appeared and announced to the villagers that he would buy monkeys for $10 each. The villagers seeing that there were many monkeys around, went out to the forest, and started catching them.

The man bought thousands at $10 and as supply started to diminish, the villagers stopped their effort. He further announced that he would now buy at $20. This renewed the efforts of the villagers and they started catching monkeys again.

Soon the supply diminished even further and people started going back to their farms. The offer increased to $25 each and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!

The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now buy on behalf of him.

In the absence of the man, the assistant told the villagers. "Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35 and when the man returns from the city, you can sell them to him for $50 each."

The villagers rounded up with all their savings and bought all the monkeys. Then they never saw the man nor his assistant, only monkeys everywhere!

Now you have a better understanding of how the stock market works.

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Countdown To 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. There are still spots remaining. 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 - 662.78

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 - 1304.34

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 - 1304.34

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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CPTI APRIL POSITION

CPTI April Position #1 - RUT Bull Put Spread - 662.78

On 3/5, with the RUT at about 674.50, we sold 20 RUT April 560 puts and bought 20 RUT April 550 puts for a credit of $.55 ($1,100). 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 - 1304.34

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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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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