Option Investor
Updates

IT'S QUICKIE TIME - IF YOU DARE

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The market had a damn nice bounce today. It tested the lows and reversed back and everything was green again – for the moment. Today’s bounce restored the chunk of cushions for our positions that we lost Wednesday. On the surface, it looks like we’ll be OK. One day at a time, folks. One day at a time.

Quickie Time Again
I’ve been accused of having balls of steel. After October, I’ve also been accused of having brains of steel. Both are true to a degree. I try to stay away from magnets. But, now we’re going to see who has the steel cajones to trade this month’s quickies. Don’t get me wrong. This is not a dare.

Remember, I don’t trade the quickies. They are risky, especially in this market environment. They are not official Couch Potato portfolio trades. Those who choose to trade the Quickies, should be skilled traders with sizeable trading accounts who know how to get into and out of the trades if/when the situation calls for it. As always, adjust the number of contracts to your account size, be very careful and make sure you double check the option symbols before placing your trades

November Quickie #1 – RUT Iron Condor – 491.23
Sell 20 November RUT 430 puts – RUWWI
Buy 20 November RUT 420 puts – RUWWG
Credit of about $.70 ($1,400)

Sell 20 November RUT 550 calls – RUWKJ
Buy 20 November RUT 560 calls – RUWKL
Credit of about $.50 ($1,000)

Net credit and total profit potential is $1.20 ($2,400). Maintenance is 20,000. Maximum profit range is 430 to 550. Be careful.

November Quickie #2 – RUT Butterfly – 491.23
Buy 10 November RUT 460 puts – RUWWK
Sell 20 November RUT 450 puts – RUWWY
Buy 10 November RUT 440 puts – RUWWO
Debit of about $.70 ($700)

November Quickie #3 – RUT Butterfly – 491.23
Buy 10 November RUT 520 calls – RUWKD
Sell 20 November RUT 530 calls – RUWKF
Buy 10 November RUT 540 calls – RUWKH
Debit of about $.95 ($950)

You can construct your butterflies anywhere above or below these suggested levels. If you remember, these out of the money butterflies are like little time bombs. They are relatively cheap and have the potential to yield a very nice reward should the RUT finish inside either of the spreads.

If you have a downward bias, you can put on Quickie #2. If you have an upward bias, consider Quickie #3. If you don’t have a preference, you can play both. Don’t forget, you can configure the butterfly of your choice. If you don’t like these numbers, you might use the IWM (which tracks the RUT) for a scaled down version.

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Employment Cutback Solution

Fellow Business Executives:

As the CFO of this business that employees 140 people, I have resigned myself to the fact that Barack Obama will be our next President, and that our taxes and government fees will increase in a BIG way.

To compensate for these increases, I figure that our Clients will have to see an increase in our fees to them of about 8% but since we cannot increase our fees right now due to the dismal state of our economy. We will have to lay off six of our employees instead. This has really been eating at me for a while as we believe we are family here and I didn't know how to choose who will have to go.

So, this is what I did. I strolled through our parking lot and found eight Obama bumper stickers on our employees' cars and have decided these folks will be the first to be laid off. I can't think of a more fair way to approach this problem. These folks wanted change; I gave it to them.

If you have a better idea, let me know.

(Thanks to Couch Potato Dave for sending us this great example of deductive reasoning)

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NOVEMBER PORTFOLIO POSITIONS
CPTI NOVEMBER Position #1 - RUT Bull Put Spread – 491.23
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 – 491.23
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 – 491.23
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 – 491.23
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.

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