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Updates

A Return To Profitability

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We made money this November cycle, but it wasn’t easy. Nothing is easy in the market these days. Plus, it doesn’t look like there’s much relief in the near future. The huge volatility makes it tough to trade range bound strategies.

The November cycle was the first cycle of the seventh year in which we’ve been tracking the Couch Potato Portfolio. We recorded an $1,800 profit. It’s not going to set the world on fire, but I’ll take it. It’s our 65th profitable cycle out of 72.

Thanksgiving week is traditionally a positive week. Tradition, and historical tendencies, don’t seem to mean squat anymore. The market is primed to continue an oversold bounce, but don’t bet the rent money on it. If you want something to bet on, bet on the pirates in Somalia. They are holding our oil and ship personnel hostage. I heard that they’ve already taken in $20 million in ransom money. They seem to have their business model figured out a lot better than our car companies. Low overhead, no unions, high profit margin . . . There’s a degree of risk, but look at their risk/reward ratio.

I’m glad we chose to close our RUT 390/380 bull put spread ahead of time. I slept a lot better not having to worry about it for the entire week. Those who held on for dear life got lucky. They were rewarded by positive futures and a pop in the Friday settlement number. They escaped by their short and curlies when the RUT settled at 392.51.

Personally, with the chaos in the market, I was a little worried about our 360/350 RUT bull put spread. We had a 25-point cushion for the settlement number. Hey, stranger things have happened.

I’m not all that comfortable with our December 330/320 RUT bull put spread. We have a 76-point cushion. Under normal circumstances, that’s not bad. But, these aren’t normal circumstances, so we’re going to keep a close watch on the position. Four weeks is a long time.

Based on Friday’s closing prices, it would cost about $2.00 to close out the 330/320 bull put spread. That’s what huge volatility will do (VIX = 72.67). However, the delta is only 12. Supposedly, there’s an 88% mathematical chance of profitability. We’ll let the position run for awhile. Maybe the market will surprise us.

Detroit Lions: 0-11. The closest thing to perfection.

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TRACKING CPTI PORTFOLIO RESULTS
Welcome to our tracking of CPTI portfolio's year number seven! We've just completed the first month (November) of CPTI tracking year number seven. We had a profitable month. Our profit for the first month of our seventh year was $1,800. In our seventh tracking year, we have posted a profit of $1,800. It’s a beginning.

RECAP OF OCTOBER POSITIONS
RUT Bull Put Spread #1– Profit: $200
RUT Bull Put Spread #2 – Profit: $1,600
NOVEMBER PROFIT: $1,800.

November Settlement Numbers
S&P 500: $SET – 763.56
Russell 2000: $RLS – 392.51
S&P 100: OEX – 372.16
MID 400: $MIV – 425.86

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SUMMARY OF NOVEMBER PORTFOLIO POSITIONS

CPTI NOVEMBER Position #1 - RUT Bull Put Spread – 385.31
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 was $20,000. Earlier this week we closed out our position for $.70. We kept a dime of our premium – leaving us with a profit of $200.

CPTI NOVEMBER Position #2 - RUT Bull Put Spread – 385.31
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. PROFIT: $1,600

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DECEMBER PORTFOLIO POSITION

CPTI DECEMBER Position #1 - RUT Bull Put Spread – 385.31
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 – 385.31
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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