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TOTALLY UFB

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What a day. It was UFB. That's another of my favorite acronyms. I'll let you figure it out.

It got a little exciting today for our SPX September 1120/1110 bull put spread. Honestly, I was only minutes from sending out a posting to close out the position for $2.00. The SPX got all the way down to 1133 and it was about time to GTFO.

We got lucky. It was at that moment that the market turned. One tick up, then another, then another, and another. The SPX didn't stop ticking until it had eliminated a 23-point deficit and had tacked on another 50 positive points by the close.

The bottom line is that both of our September positions will expire worthless - and our October positions don't look like problem children anymore. This may be temporary, but it's certainly a lot better place to be.

Our Couch Potato portfolio may have been 100% profitable, but the results are bittersweet. Why? Because I know a lot of people lost their ass in the last few weeks - in their stocks, mutual funds, and other investments. Nothing was spared. Nothing was sacred.

I had to close some positions in my client's accounts early and we experienced some credit spread losses, but the losses were kept under control. It seems like the market is keeping close tabs on me. As soon as I capitulate on a threatened position, the market takes that as a signal and it reverses and makes me feel like mierde - even though I know I did the right thing.

This kind of market action is why I'm always harping that the only way to own a stock is to collar it. The collar protects against catastrophic events. If the recent market activity doesn't qualify as a catastrophic event, it's close enough for government work.

There are a few different ways to collar a stock. We go over them thoroughly at my two day seminar. You have to protect yourself, more specifically, your money. If you must own stock, there's only one sensible way to do it.

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True Love

Ed and Dorothy met while on vacation and Ed fell head over heels for her.

Wherein after a couple of weeks Ed took Dorothy out to various dance clubs, restaurants, concerts, etc., he was convinced that it was true love.

And so....on the last night of his vacation, the two of them went to dinner and had a serious talk about how the relationship would continue.

'It's only fair to warn you , I'm a total golf nut, ' Ed said to his newfound lady friend, 'I eat, sleep and breathe golf , so if that's going to be a problem, you'd better say so now!'

'Dorothy took a deep breath and responded: 'Since we're being honest with each other, here goes....you need to know that I'm a hooker'

'I see', Ed replied, looked down at the table, and was quiet for a moment, deep in thought...


Then he added, 'You know, it's probably because you're not keeping your wrists straight when you tee off.'

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CPTI SEPTEMBER Position #1 - RUT Bull Put Spread - 723.68

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.

CPTI SEPTEMBER Position #2 - SPX Bull Put Spread - 1206.51

On 8/7, with the SPX at about 1275, we sold 20 SPX September 1120 puts and bought 20 SPX September 1110 puts for a credit of $.55 ($1,100). Maintenance is $20,000.

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CPTI OCTOBER Position #1 - RUT Bull Put Spread - 723.68

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.

CPTI OCTOBER Position #2 - SPX Bull Put Spread - 1206.51

On 8/25, with the SPX at about 1267, we sold 20 SPX October 1110 puts and bought 20 SPX October 1100 puts for a credit of $.60 ($1,200). Maintenance is $20,000. I'll look to put on a bear call spread in the future - IF it makes sense.

CPTI OCTOBER Position #3 - SPX Bear Call Spread - 1206.51

On 9/2 with the SPX at about 1294, we sold 10 October 1415 calls and bought 10 SPX October 1425 calls for a credit of $.55 ($550). No additional maintenance is required since we already have the SPX October bull put spreads.

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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 - 723.68

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 - 723.68

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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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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