Option Investor
Updates

ANOTHER DAY AT THE OFFICE

HAVING TROUBLE PRINTING?
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The problem is that it's the office from hell. The machines in this office are political machines. The petty cash is missing. The books have been cooked. Basically, the inmates have taken over the asylum. Greed has left Wall Street pretty much in a shambles and now we have a bunch of egotistical politicians trying to hash out a plan to bail out the Wall Street thieves and the irresponsible, ignorant and gullible masses on Main Street.

On the surface it looked like the market had a nice up day based on the word that a bail out deal was imminent. The Dow was up almost 200 points. The S&P was up 23.31 and the Nasdaq was up almost 31 points. A good start, right? Reason to be optimistic? That's what the markets thought.

Enter the Republicans. The next thing we know the deal is on hold. As I write this (8:45 p.m. ET), the Republicans want to make changes. Can the politicians get together long enough to sort things out? Who knows? The futures are down over 15 points. At this rate, we'll be giving back all of today's gains and then some.

Think about it. After this nonsense, would you trust Wall Street with your hard earned money? Would you trust your senator to take out your garbage? Let's just say that the country is in deep shit. It's going to take a lot of shoveling to get us out of it. Both the politicians and Wall Street types are used to shoveling it. Let's see if they can put their egos, their greed and parties aside and cooperate to do something constructive for our country.

We'll know a lot more by tomorrow morning. We can only hope.

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October Position Update

Based on Thursday's prices, we have a 100 point cushion on our SPX 1110/1100 spread and a 105 point cushion on our RUT 600/590 spread. Sounds pretty safe, but in this volatile environment when the SPX moves in 50-point chunks, you never know.

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OCTOBER PORTFOLIO POSITIONS

CPTI OCTOBER Position #1 - RUT Bull Put Spread - 705.74

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 - 1209.18

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 - 1209.18

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 September profits, our new cash total is $66,440 ($64,220 + $2,100).

SEPTEMBER ZERO PLUS POSITION - 705.74

We will be watching for an opportunity to put on a new position for our Zero Plus strategy.

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SHORT & SWEET - RUT - 705.74

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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