Option Investor
Updates

NAME THAT STRATEGY

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A STRATEGY IN NEED OF A NAME

Apparently, a bunch of you liked the strategy I discussed in Thursday's column. How could I tell? Well, in addition to the emails I received, the volume on the December RUT far out-of-the-money puts looked suspiciously telling.

The Dec. 450 had a volume of 7, the 490 - 13, the 500 - 2, the 510 - 2, the 520 - 2, the 530 - 2, 540 - 2, and the 550 - 2. That's a bit unusual, so I think that members of the Couch Potato family might be responsible for a bunch of those. Those strikes don't typically get traded.

There were also a bunch of May far OTM puts purchased that I suspect were bought to temporarily protect the short RUT December puts. The volume on those strikes was higher, so it is more difficult to identify. There are currently no May strikes below 490.

I even noticed a few contracts being traded in the December 910 and 930 calls. Apparently some folks have taken the initiative to do the call side and make the position a "naked strangle." Actually, for those who are buying protective puts and calls for the naked positions, it's now a diagonal calendar credit spread - or something like that. Boring.

Let's Have Some Fun
I think this strategy deserves a better name - maybe something with some "trade" appeal, or an interesting acronym. Should we come up with another name for this position? Or should we just leave it alone? I'll take any and all suggestions. If I get some good ones, I'll post them and we can vote.

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While We're There . . .
Since we're looking at the RUT option chain, let me make an observation and ask a question. Based on Friday's chain, the December 400 puts have an open interest of 2,490. The 450 puts have an open interest of 933. The 490s open interest is 15. The 500s open interest is 1,900. The 510s is 24. The 520s is 14. The 530s is 23.

Notice a pattern? Why do you suppose the open interest in the December 400 puts is 2,490 and the 500 puts is 1,900 while the 490s, 510s, 520s, & 530s are all below 25? My seminar grads know the answer. Do you?

Some folks believe that the open interest numbers can provide some support and/or resistance information. It may, in some instances. As you know, I?m not sold on it. Many aspects of technical analysis escape me.

The answer to the question is actually pretty simple. The 400, 450 and 500 strikes have been available much longer.

If you go many months out and far out of the money, you'll notice that it's the round numbered strikes that are available. This is particularly true on the S&P 500 chain. Just look at the S&P July options. They are in 25-point strike price increments. If anyone is interested in trading the July S&P options, they will trade the strike prices being offered, or not at all.

As time moves on, and we get closer to July, the market makers will open up other strikes to be traded - when they believe there will be enough demand to make it worth their while.

So, the large open interest numbers do not necessarily tell us anything more than the option traders traded what is available. It is possible that these same traders will be poised to close or adjust their positions as the underlying moves toward these strikes. That is a piece of information - for what it's worth.

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By The Way . . .
Remember about a week ago the email that was sent to me questioning my approach and style of trading? Well, I heard back from the sender. He is just a guy who was looking for a service to provide trades and who wasn't specifically looking for a teacher. He didn't really do much research on our service before he shot off the email. We exchanged a few emails and he seems to be a nice enough fellow and he does wish us all the best in our trading.

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S&P 500 Support & Resistance - Closed at 1370.40
Resistance:
1370 is the August 2007 intraday low
1374 is the March 2007 closing low
The 90 day SMA at 1386
1396 is the January 2008 peak
1406 is the August and November 2007 closing low
1420 is a longer term trendline from the August 2003/September 2004 lows

Support:
The 50 day EMA at 1351
The 18 day EMA at 1341
1325 from May 2006 peak prior to the summer 2006 correction
1324 is an ancient trendline
1317 is the early February low
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
1272.66 is the March 2008 low
1270 is the January intraday low
1260 from July 2006
1258 to 1255 from May and June 2006 lows

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Your Tax Rebate
As you may have heard the Bush Administration said each and every one of us would now get a nice rebate.
If we spend that money at Wal-Mart, all the money will go to China.
If we spend it on gasoline, it will all go to the Arabs.
If we spend it on fruit and vegetables, it will all go to Mexico, Honduras, and Guatemala.
If we purchase a good car, it will all go to Japan.
If we purchase useless crap, it will all go to Taiwan and none of it will help the American economy.
We need to keep that money here in America. So, the only way to keep that money here at home is to buy prostitutes and beer, since those are the only businesses still in the US.

My name is Elliot Spitzer and I approved this ad...

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NEW SEMINAR DATE - LAS VEGAS - June 21 & 22
I will be presenting a two-day advanced CPTI seminar in Las Vegas on June 21st & 22nd (Saturday & Sunday). Come on down! As of this evening, eight spots remain.

I?ve also negotiated an unbelievably low room rate for the weekend. Vegas is great for a getaway as well as for attending a seminar. Check out your calendar and contact me as soon as possible. Send your phone number to me at - Contact Support. I will personally call you to go over the details and to answer any questions you may have.

Also attending (and speaking) at the Las Vegas seminar will be Mike Cavanaugh, my personal broker and option strategist extraordinaire. Actually, he knows this stuff better than I do. I guaranteed you'll be impressed.

Early Bird Special - SAVE $100 - 11 Days Left
If you reserve your spot for the upcoming Las Vegas seminar by April 11th, you will only pay $895 - that's $100 off the normal low seminar price of only $995.

Reserving early will accomplish a few different things. The earlier you reserve, the lower your airfare will be. Plus, you will be assured of a spot. The last two Las Vegas seminars have sold out well before the seminar dates.

Las Vegas Retakes Are Gone
As you may know, if you have previously taken one of my seminars (at any location), you are entitled to retake the seminar a second time at NO CHARGE! There were five retake spots available for the Vegas seminar. They are now gone. If you would like to be put on a waiting list, contact me. There is the occasional cancellation.

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CPTI APRIL POSITIONS
CPTI April Position #1 - RUT Bull Put Spread ? 713.73

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.

CPTI April Position #2 ? SPX Bull Put Spread ? 1370.40

On 3/10, with the SPX at about 1288, we sold 20 SPX April 1110 puts and bought 20 SPX April 1100 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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CPTI MAY POSITION

CPTI May Position #1 ? SPX Bull Put Spread ? 1370.40

On 3/31, with the SPX at about 1316, we sold 20 SPX May 1130 puts and bought 20 SPX May 1120 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 March profits, our new cash total is $60,460 ($58,660 $1,800).

ZERO PLUS POSITION - SPX - Bull Put Spread - 1370.40

On 3/31, with the SPX at 1316, we sold 30 SPX May 1130 puts and bought 30 SPX May 1120 puts for a credit of $.55 ($1,650). Maintenance is $30,000. We have plenty of time to find a bear call spread. Let?s hope the market cooperates.

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SEMINAR DATE -

LAS VEGAS - June 21st & 22nd

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!

59 OUT OF 64 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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