Option Investor
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OPINIONS, EVERYONE HAS ONE

HAVING TROUBLE PRINTING?
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After Friday's market action, some analysts are saying that the stock patterns are improving. Alas, the cup is half full. But, there are a couple of tough months ahead. September and October can be difficult. Even if the market moves up in the next week or two, it's going to be tough for it to follow through.

Believe me, I didn't think that up all by myself. Every technical analyst's opinion is worth about 2-cents. That's about $.50 worth of analyst's opinion. You can get another $.50 of equally as valuable an opinion by opening a half-dozen fortune cookies.

In the meantime, with a full four weeks to go, our September positions are in excellent shape. I'll be watching for an opportunity to put on another October position.

Short & Sweet Update
Our Short & Sweet strangle (Dec. 570 puts & 850 calls) may soon be ripe. Right now, based on Friday's closing prices, you can close the position for about $10.60. We originally brought in $11.60. That would represent a $1.00 profit. We traded four contracts, so the net profit would be about $400.

We've had the position since August 1. I think we can wait a little longer. With the market trying to move up, the volatility should come down a bit. Plus, next weekend we have another non-trading day - Labor Day. When the market opens Tuesday, September 2nd, we might take a serious look at taking some profits.

Against My Better Judgment
Couch Potato Traders are non-directional - at least that's the theory. In reality, I know better. While many Taters are following the plan and bringing in consistent profits, there are some out there that can't risk the temptation. What temptation?

The temptation of the Larry, Moe & Curly talking heads on the business stations touting some undervalued or beaten down stock that's about to rebound. The potential for quick profits - who can resist? I can, no problem.

I feel somewhat of a moral obligation to protect the members of my Couch Potato family - especially those who have no self-control. The least I can do is show them how they can lose less. I can't tell them how to make more doing their directional nonsense. But, we can work on limiting the risk.

If you're moderately bullish on a stock or an index, you can minimize your risk and still turn a high profit (if you guessed right) by using a bull call spread. This is all old news for experienced option traders, but there are plenty of Tater wannabees whoe still don't know any better.

A bull call spread involves buying a call at one strike price and selling a call on the same underlying at a higher strike price, both with the same expiration month. What does that accomplish? By selling the call further out, you are reducing the amount that is at risk.

When you put on the position, it's a good idea to trade the positions simultaneously, for a net debit. If you Taters been paying attention over the years, and have learned about premium negotiation, will look for the opportunity to negotiate the premiums and further reduce your initial cash outlay when you calculate your net debit.

For example, you might think RIMM, trading at 131, is going to move up a bit in the next 30 days. You buy the September 130 call for $6.80. Then, you sell the September 140 call for $2.60. Your bottom line out of pocket cost and total risk is $4.20.

Your potential profit is the difference between the strike prices (140-130) = 10, less the $4.20 net cost of the spread. So, the most you can make is $5.80 - IF RIMM cooperates and, at September expiration, closes above 140.

If you were to only buy the call, in a volatile market, the value of that call is inflated by that additional volatility. If, while you're waiting for RIMM to move up, the volatility is drained, the value of your call is reduced. So, it's possible for RIMM to actually move up and the value of the call stay the same or move down.

In a bull call spread, you don't have that worry. You are, however, limiting your upside potential. It's a trade-off. The bottom line is that, even though you think you know where a stock is going, you will be trading directionally.

To all of you directional traders, we, the option sellers, want to express out heart felt thanks. Ultimately, it's your dollars that end up in our pockets.

Seminars Spots Still Open
There are still spots open for the upcoming Dallas and Orlando 2-day advanced seminars - but they may not be for long. If you're serious about learning the intricacies of our trading methods, this is a chance for you to educate yourself and to organize your trading business. If trading is just a hobby for you, or you think you know everything, then stay home. You don't need me.

You can learn some of these same things by trading in the market. But, take it from me, it's a lot less expensive (and more enjoyable) to attend a seminar.

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Ambulance service in South Georgia, just two years after President Obama implements his national healthcare plan.



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I love humor. I like to share. Feel free to send me your jokes. mparnos@optioninvestor.com


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S&P 500 Support & Resistance:
Closed at 1292.20
Resistance:
The 50 day EMA at 1291 is bending
1317 from the February low
1320 is a 50% retracement of the May to July sell-off
1324 is the April low
The 90 day SMA at 1330
1331 is the June low
1351 is an ancient trend-line
The 200 day SMA at 1363
1370 is the August 2007 intraday low
1374 is the March 2007 closing low
1387 is the April 2008 intraday high
1396 is the February 2008 peak
1406 is the August and November 2007 closing low

Support:
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 SEPTEMBER Position #1 - RUT Bull Put Spread - 737.60

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 - 1292.20

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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CPTI OCTOBER Position #1 - RUT Bull Put Spread - 737.60

On 8,18, with the RUT at about 732, we sold 20 RUT October 600 puts and bought 20 RUT October 590 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 - 737.60

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 - 737.60

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

63 OUT OF 69 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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