Updates, Thursday, 11/06/2008 06:03:29 PM EST
HAVING TROUBLE PRINTING?
It sure looks that way. There are about three weeks left in the November cycle. Our November positions still have a nice cushion. But, if the market keeps chipping away at the cushion in 20 – 30 point chunks, we may find ourselves with some decisions to make.
Believe it or not, our 390/380 bull put spread still has a delta of -2 – which means that, mathematically, we have a 98% chance of success. Plus, our 360/350 bull put spread has a delta of almost zero. Let’s hope the market is paying close attention to those delta numbers and behaves accordingly.
New December Position
This morning, with the RUT at about 510, I sent out a suggested position – the December 330/320 bull put spread for a credit of about $.55.
As I watched the volume levels of those two options, it was apparent that people are scaling down the number of contracts they are trading. That’s perfectly logical reaction after possibly taking a big hit last month. Control your risk. It’s a great strategy. You should always adjust your contracts to your risk tolerance.
I also noticed that a number of contracts of the December 310 put traded, indicating that some of you waited and traded the 320/310 bull put spread – and got that extra ten points of safety. Either way, I like our chances. The delta for the 330/320 bull put spread says we have a 98% chance of success.
I know I keep bringing up this QQQQ strangle strategy. But, if you’ve been paying attention, you’ll notice that this volatile market is ideal for this strategy. Look at a daily chart. The QQQQs have been making the required 3-4 point moves on a pretty regular basis.
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NOVEMBER PORTFOLIO POSITIONS
CPTI NOVEMBER Position #1 - RUT Bull Put Spread – 495.84
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.
CPTI NOVEMBER Position #2 - RUT Bull Put Spread – 495.84
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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DECEMBER PORTFOLIO POSITION
CPTI DECEMBER Position #1 - RUT Bull Put Spread – 495.84
On 11/6, with the RUT at about 510, we sold 20 RUT December 330 puts and bought 20 RUT December 320 puts for a credit of $.55 ($1,100). 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 – 495.84
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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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.