Option Investor

Goals For 2009

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Before I get into my goals for next year, let me take a minute to wish you all a happy, healthy and prosperous 2009. I plan to provide you with continuing education to help you become the best traders you can be. Maybe, as you learn, you’ll even smile a bit along this journey.

The new year – 2009 – is right around the corner. This will be a year of challenges for many of us, both personally and professionally. It’s been proven that, when you establish goals, there is a significantly higher likelihood that you will follow through if you write them down.


1. To continue to cherish Lydia, my wife, and always remember how lucky I am to have someone like her in my life – who actually kinda likes me.

2. To continue to love and appreciate my two kids – each amazing in his/her own way. When I see how so many children turn out, I can’t help but be thankful that my kids (Jill & Brian) have become productive, responsible, caring adults.

3. To continue to cherish my friends. People have a tendency to underestimate friendships. Not me. In this world, I know who I can count on and who I can’t. My true friends know they can count on me as well. There are probably only a few in your life, but they’re special. Treat them that way.

4. To appreciate loyalty, honesty and respect – both personally and professionally. I have recently witnessed heartwarming degrees of loyalty. I strive to show the very same loyalty to those who deserve it. I have also found myself in a situation where I was shown neither loyalty, honesty nor respect. It will be dealt with – very soon.

5. To surround myself with positive people and influences. Negative people and relationships (personally and professionally) can suck you dry in many ways. You don’t need this. Life is tough enough. These people become a cancer and need to be cut out of your life – the sooner the better. It’s not easy, but it must be done.

6. To not loan money – period! When you loan money to friends, you will likely lose both – the money and the friend. If I feel like giving them money, I should simply give them the money and expect nothing in return.

7. To accept the fact that everyone is not going to like me or the decisions I make in my life. I have to do what I believe is right for me. I can’t please everyone, and I’d be foolish to try.

8. To make a concerted effort to improve my health. Emotionally I’m in pretty good shape, but there’s always room for improvement of my physical health. Fortunately, I have Lydia to keep me on a short leash. Damn, those double cheeseburgers are good, but sacrifices have to be made.

9. To not procrastinate. Actually, I’m getting better at this. I even change light bulbs right after they burn out. Hey, it’s a start.

10. To not take it personally when someone cuts me off on the street. Don’t you just want to kill those SOBs? Come on, Mike. Calm down.

11. To consistently make better trading decisions. I screwed up big time on a few this year because I let emotion get the best of me. Hey, I’m human, too. But that’s no excuse. I need to do as I teach – run my trading like a business – and make decisions accordingly.

12. To get organized. Easy to say, but if you’re not used to it, it’s tough to do. It’s culture shock for a Couch Potato. I’m starting a new business venture that will demand organization if I expect to be successful. My new life will now include a zillion file folders and new computer programs I’ll have to learn. Help!

13. To be open to new things. To be successful, this old dog is going to have to learn a few new tricks. Now, there’s no choice in the matter. I can do it, but it’s like having to go back to school.

14. To continue my options education. I know a lot, but not enough. Recently, I had one of my seminar grads send me a variation of a credit spread adjustment that makes a lot of sense. I’ll be sharing it in my column soon. That’s just a small sample. There are many options teachers I respect, and I’m going to make an effort to learn as much as I can. You can never have too many weapons in your arsenal.

15. To recognize and accept that people are, pretty much, doing the best they can – and to not have unrealistic expectations of people. People don’t change. Don’t expect them to. Unrealistic expectations end up with disappointment and ultimately resentment. Those are feelings you don’t need in your life.

16. To continue to appreciate technology – like Google. I was recently looking for a writer that I highly respect. All I had to do was Google his name and it took me right to his website. It’s amazing how easy it was. I have a lot to earn. I’ll make the effort. I know it will be worth it.

Stop The Insanity!
Today I’ll be watching the Detroit Lions make history. In all likelihood, they will lose their 16th game of the season – without a win. It’s pretty incredible, when you think about it. It’s never been done before, by a professional football team. I suppose, if you’re going to suck, you might as well strive to be the very best.

Is this year anything new to Detroit fans? No. The Lions have been an embarrassment for years. This particular sports franchise has won only a single playoff game since the mid-1950s. You would have thought that they might have been at least mediocre some years, even if it were just by accident.

They did have Barry Sanders, arguably the best runner to ever play the game. He was a pleasure to watch as he tried to burst through holes not made by an inferior offensive line. Did the Lions win when they had Sanders? Occasionally.

There is one constant here. The ownership. William Clay Ford has owned the Lions what seems like forever. Over the years, the Ford family figured out how to make and sell cars for a profit. Those skills obviously have not been translated to football.

Last week Ford announced that he will not be changing the management of the team. Sends an interesting message, doesn’t it?

How different is what William Clay Ford is doing with the Lions from what we have a tendency to do with trades? Not different at all. We hold onto these damn things much too long, hoping that the market will do our bidding.

We’re supposed to learn from our mistakes. I hope I have. I know I’m not alone. I hope you have too.

Einstein’s definition of insanity – repeating the same thing over and over again, expecting a different result. Maybe we can stop ours. There are still 50,000 people who show up to watch the Lions play in Detroit, game after game, year after year. Doesn’t say much for them, does it? Then again, they’ve probably never heard of Eistein.

Our Positions
Friday was rather uneventful on very low volume. I’ll take it. As a matter of fact, I’ll take 14 more days just like it. Our SPX Iron Condor, RUT bull put spread, and Zero Plus positions look just fine with no problems in sight.

Last week we threw out an order to close our Zero Plus RUT position for a nickel without any success. All of the positions are ripe to be closed out early for a nickel or a dime. Take advantage of the calm, if you can, and free up some money for February.

February is a five week option cycle. The long ones are 25% more grief or profitable – one or the other, or both. I’ll be looking for February positions this week.


CPTI DECEMBER Position #1 - RUT Bull Put Spread – 479.17
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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CPTI JANUARY Position #1 - RUT Bull Put Spread – 476.77
On 12/1, with the RUT at about 455, we sold 20 RUT January 290 puts and bought 20 RUT January 280 puts for a credit of $.75 ($1,500). Maintenance is $20,000.

CPTI JANUARY Position #2 - SPX Iron Condor – 872.78
On 12/8, with the SPX at about 877, we sold 15 RUT January 680 puts and bought 15 SPX January 670 puts for a credit of $.80 ($1,600). Then, when the market moved up, we sold 15 January SPX 1090 calls and bought 15 January SPX 1100 calls for a credit of $.70 ($1,050). The total net credit is $1.50 ($2,250). Maintenance is $15,000.

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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 November profits, our new cash total is $68,840 ($66,440 + $2,400).

ZERO PLUS POSITION – RUT Bull Put Spread – 476.77

On Monday, 12/1, we sold 30 January 280/270 RUT bull put spreads for a credit of $.80 ($2,400). We will look for a possible bear call spread to complete the Iron Condor if an attractive situation presents itself.

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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