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CALL THE MARKET POLICE

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You've seen the public service announcement on TV. It says, "This is your brain. Now, this is your brain on crack." I think we can safely say the same about the markets. The market police aren't going to be much help, though.

This weekend I've been reading opinions (they're like rear ends, everyone has one), on whether Friday's move was a break through resistance, or just another bunch of short covering. I'm glad I don't pay much attention to them. I'm just as glad that we don't trade directionally.

Our non-directional strategies work best in non-trending markets. This market may not be trending, but the bounces are just too damn severe. I get emails asking me why I'm comfortable putting on bull put spreads and reluctant to put on accompanying bear call spreads.

The majority of the times that we've had problems with our Couch Potato portfolio positions in the past have been on the upside - not the downside. Our downside has been tested a few times. We've even had to adjust/exit a position occasionally. Notice, though, how the market responds to large downside moves. It tends to snap back.

The times that we've bailed on our positions, had we been a little more patient, the market rebounded and our positions would have been completely profitable. It's not something you can count on, but it happens frequently.

However, on the upside, buyers keep climbing the wall of worry. The uptrends can be slow and relentless. The market may come back down, but not in the same snap-back fashion. That's why I worry more about putting on bear call spreads.

August Positions
With less than a week to go to August expiration, both our RUT and SPX positions seem to be in excellent shape. Since we initiated the bull put spreads, I have received emails asking me why I didn't consider the bear call spreads to complete the condors.

On the surface, it appeared the market was in a free-fall. The suggested positions were in the neighborhood of the RUT 760/770s and the SPX 1350/1360s. I know some folks put on similar positions. When the RUT was around 660-670, the 760/770 spread looked pretty good.

Now, I'm getting emails from those same people. With the RUT at 734, they're getting worried. It may turn out to be much ado about nothing. But, then again, if it turns out that the market is breaking out, they might be in deep shit. I looked at the option chain. At the time, they could have closed their 760/770 bull put spreads for about $.50 - less than the premium taken in initially.

Do you think they closed their positions? At the time, the RUT was still 30 points away from the 760 short strike. The question is not only, "what do you think the market is going to do?" The question is, "Do you want to spend the next week popping Valium and taking shots of Pepto-Bismol?"

Some folks use the delta of the short option as a method of telling them when to GTFO of the position. When the delta of the short option gets to 25, it's time to get the hell out of Dodge and make other arrangements.

There are many ways of determining one?s exit/adjustment point when an position is threatened. We go over these, in depth, at my two-day advanced seminar. There are a lot of variables when it comes to making those decisions. It's not one size fits all. Each trader has to make his/her own decisions. What do you think about when making your adjustment decisions?

Dallas Seminar Early Bird Special
There is only one week remaining to save $100 by taking advantage of the Dallas seminar (October 3 & 4) early bird special. Don't be shy. Also, a reminder for all seminar graduates - there are only two retake spots remaining for the upcoming Dallas seminar (October 3 & 4).

Contact me as soon as possible to come join us as we go step by step through our arsenal of non-directional strategies and show you how easy it can be to position yourself for success. As you can tell by our results, even in these crazy markets we can generate a consistent cash flow

S&P 500 Support & Resistance:
Closed at 1296.31
Resistance:
1317 from the February low
1320 is a 50% retracement of the May to July sell-off
1324 is the April low
1331 is the June low
1348 is an ancient trendline
1370 is the August 2007 intraday low
1374 is the March 2007 closing low
The 200 day SMA at 1375
1387 is the April 2008 intraday high
1396 is the February 2008 peak
1406 is the August and November 2007 closing low

Support:
The 50 day EMA at 1293
1285 is the recent July peak
1270 is the January low
1257 is the March low
1244 is an August 2005 peak
1240 to 1221 are September 2005 peaks1234 is the July 2006 low
1234 is the late July low
1224 is the June 2006 low
1176 from the Q4 2005 lows
1167 is the January 2005 low
1154 from the May 2005 lows
1142 is the 2005 closing low

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CPTI AUGUST POSITION

CPTI July Position #1 - SPX Bull Put Spread - 1296.32

On 6/19, with the SPX at about 1342, we sold 20 SPX August 1170 puts and bought 20 SPX August 1160 puts for a credit of $.65 ($1,300). Maintenance is $20,000. I'll look to put on a bear call spread in the future - IF it makes sense.

CPTI AUGUST Position #2 - RUT Bull Put Spread - 734.30

On 5/23, with the RUT at about 735, we sold 20 RUT August 620 puts and bought 20 RUT August 610 puts for a credit of $.65 ($1,300). Maintenance is $20,000.

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CPTI SEPTEMBER Position #1 - RUT Bull Put Spread - 734.30

On 7/31, with the RUT at about 720, we sold 20 RUT September 610 puts and bought 20 RUT September 600 puts for a credit of $.55 ($1,100). Maintenance is $20,000. I'll look to put on a bear call spread in the future - IF it makes sense.

CPTI SEPTEMBER Position #2 - SPX Bull Put Spread - 1296.32

On 8/7, with the SPX at about 1275, we sold 20 RUT September 1120 puts and bought 20 SPX September 1110 puts for a credit of $.55 ($1,100). Maintenance is $20,000. I'll 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 $64,220 ($62,110 $2,100).

SEPTEMBER ZERO PLUS POSITION - 734.30

On Friday 7/25, I put out an order to sell 30 September 1080/1070 bull put spreads for $.70. It was filled when the SPX dipped to 1251. That's $2,100 of premium. It's going to be a long wait, but I'm in no hurry.

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SHORT & SWEET - RUT - 734.30

On 8/1, we opened a new hypothetical "Short & Sweet" position, selling 4 December RUT 560 puts and selling 4 RUT 850 calls for a total credit of $11.60.

Traders with less experience, smaller trading accounts or those without customer portfolio margining, might want to buy 4 of the September 570 puts and 4 of the September 850 calls to give you two months (August & September) where the short positions are covered for about $1.10. Their net credit would then be $10.50.

Our objective is to do exactly what we did with the previous Short & Sweet Strangle. We want to let time decay and reducing implied volatility do their thing, so we can close the position and lock in some nice profits.

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SEMINAR DATES -

DALLAS, TEXAS - October 3, 4 & 5

ORLANDO, FLORIDA - December 6, 7 & 8

62 OUT OF 68 PROFITABLE MONTHS!!
WANT TO ACHIEVE SUCCESS WITHOUT STRESS?
OF COURSE YOU DO!!
LEARN OUR CPTI WEALTH-BUILDING TECHNIQUES!

I?ve negotiated excellent low room rates for both seminars. Check your calendar and contact me as soon as possible. Send me your phone number 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) in Dallas and Orlando will be Mike Cavanaugh, my personal broker and option strategist extraordinaire. Actually, he knows this stuff better than I do. I guarantee you'll be impressed.

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!

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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