Option Investor
Updates

TIME TO LOOK FORWARD

HAVING TROUBLE PRINTING?
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The Friday morning settlement will be interesting - especially in this volatile environment. However, unless the SPX settles up 165 points and the RUT settles up 64 points, it's not going to matter.

We need to start looking forward, not backwards. Hopefully, we learned from this painful chapter. Now, we have to focus on applying our wares to November and the opportunities that may exist as we begin the road back. One day we'll look back at this debacle and laugh - but not for about 20 years.

Earlier this week, I suggested a November position on the RUT, the 360/350 bull put spread for a premium of $.80. On Monday, the market gapped up and never looked back. So, the order didn?t get filled - not even close. But, what comes up usually comes down. The market came down and, early today, the position was filled.

Yesterday morning, I reminded our Couch Potato community of the position I suggested for Monday. However, I inadvertently put in a second set of strikes (390/380). Some folks stuck with the first set and others were filled on the second set, also for $.80. Not a problem. We'll keep track of both RUT positions in the newsletter and consider them official Couch Potato portfolio positions.

Many of you are holding off trading for awhile. Other conservative traders are adjusting the number of contracts they trade downward. Both are completely understandable. Other traders, who ignored our suggestions, are suffering because they used up too large a portion of their trading account on October positions. It seems that each trader has his/her own reaction to what has happened this month.

Believe it or not, some actually turned a profit.

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More Ways To Skin A Cat

I wanted to share this email (below) with you. I try to offer a variety of strategies for your consideration. Different traders gravitate to different strategies. Steven obviously likes to play the bouncing strangles.

Hello Mike -- Thanks for giving me a lesson on strangle few weeks ago. I have been keeping doing this and I am making good money on it. I will give you an example,

Let's say QQQ is 33.50 and I bought 20 contracts of QQQ Nov 34 puts and 20 contracts of QQQ Nov 33 calls and the market moves down lets say 32.50. I closed both transactions to take profit and place another 20 contracts of QQQ Nov 33 puts and 20 contracts of QQQ Nov 32 calls just before the market closes. I was betting that there will be a gap at the open in the next day - that means I don't have to worry if the market goes in the wrong way for my bet. It really works as long as the premium doesn't fall too much. I don't do this every day. It could be every couple of days to two weeks.

One day a week ago, when DJ dropped 700 points, I closed QQQ puts and keep the QQQ calls open and I was hoping for a bounce -- and it did bounce in the next day. Nice gain for both transactions. After the bounce in the next day I place both QQQ calls and puts just before the close to start over. Thanks again - Steven

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Market Quote Of The Day

This is worse than a divorce. I lost half of my net worth and I still have my wife.

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OCTOBER PORTFOLIO POSITIONS

CPTI OCTOBER Position #1 - RUT Bull Put Spread - 536.57

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.

CPTI OCTOBER Position #2 - SPX Bull Put Spread - 899.22

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.

CPTI OCTOBER Position #3 - SPX Bear Call Spread - 899.22

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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NOVEMBER PORTFOLIO POSITIONS

CPTI NOVEMBER Position #1 - RUT Bull Put Spread - 536.57

On 10/15, with the RUT at about 436, we sold 20 RUT November 390 puts and bought 20 RUT November 380 puts for a credit of $.80 ($1,600). Maintenance is $20,000.

NOVEMBER PORTFOLIO POSITIONS

CPTI NOVEMBER Position #2 - RUT Bull Put Spread - 536.57

On 10/16, with the RUT at about 480, we sold 20 RUT November 360 puts and bought 20 RUT November 350 puts for a credit of $.80 ($1,600). Maintenance is $20,000.

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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).

ZERO PLUS POSITION - RUT Bull Put Spread - 536.57

On 10/16. we sold 30 of the November 360 bull put spreads and bought 30 of the November RUT 350 spreads for a credit of $.80 ($2,400).

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SHORT & SWEET - RUT - 536.57

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.

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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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