Market Summary
Tomorrow is Quadruple Witching day when stock index futures, stock index options, stock options and stock futures expire. We expect our TLT put spread to expire worthless as the price gapped higher at the open of the past three days. Treasury notes appear to be trying to recover from oversold conditions as inflation fears have subsided a bit. Downward price momentum is dissipating and the current support level is holding up - now may be a good opportunity to open an October expiration month TLT bull put spread. Also, gold appears to have stabilized after a frantic price run up from the previous four weeks and we can hedge our October GLD trade by executing an iron condor.

TLT Position Update
TLT closed at $121.41 on Thursday – the September put spread is approx. $900 in the black

The August 9th Couch Potato published a September expiration TLT put spread
We plan on letting the put spread worthless for an approx. $1,100 gain. However, if TLT pulls back significantly tomorrow (below $120.40) the best bet is to play it safe and buy back the short $120 strike put contracts. (see tables below)

TLT ETF Trade Setup ---------------------------------------------------------
We are opening an October option expiration month TLT bull put spread and we want the put spread to generate a minimum .50 net credit AND we prefer an 80% probability that the short put contracts will expire worthless and we get to keep most of the sold premium. The spread in the table below complies with our trading rules for initiating the October expiration month option series TLT bull put spread (based on Thursday's closing prices). The suggestion is to submit an order to purchase/sell the option strikes prices below. Please confirm the correct option symbols with your broker.

Premium Credit $.55
Total Option Premium Received $1,100 (Excludes commissions and fees)
Maximum Risk $8,900
Margin Requirement $10,000
20 contracts traded on each leg (number of contracts can be increased or decreased based on risk tolerance and/or funds available to trade; this will impact Total Premium Received, Maximum Risk amount, and Margin Required)

If prices gap up tomorrow the put spread may not be available as published and unless the gap is filled we will hold off on the trade. Conversely if prices drop sharply then we will probably initiate the put spread at a lower strike prices with a similar risk profile as described above.

GLD ETF Trade Setup ---------------------------------------------------------
We are opening an October option expiration month GLD iron condor

The GLD iron condor should generate a minimum .50 net credit on each leg AND we prefer that the short strikes fit our statistical probability profile (80% chance all the options will expire worthless and we get to keep most of the sold premium). The spread in tables below comply with our trading rules for initiating the October expiration month option series GLD iron condor (based on Thursday's closing prices). The suggestion is to submit an order to purchase/sell the option strikes prices below. Please confirm the correct option symbols with your broker.

Premium Credit $1.12
Total Option Premium Received $2,240 (Excludes commissions and fees)
Maximum Risk $7,760
Margin Requirement $10,000
20 contracts traded on each leg (number of contracts can be increased or decreased based on risk tolerance and/or funds available to trade; this will impact Total Premium Received, Maximum Risk amount, and Margin Required)

If prices gap down tomorrow the call spread may not be available as published and we will hold off on this trade. Conversely if prices rise sharply then we will probably initiate the call spread at a higher strike price with a similar risk profile as described above.

If prices gap up tomorrow the put spread may not be available as published and unless the gap is filled we will hold off on the trade. Conversely if prices drop sharply then we will probably initiate the put spread at a lower strike prices with a similar risk profile as described above.

Exit Plan
As mentioned above, September expiration option contracts expire tomorrow and we expect the TLT put contracts to expire worthless.

Gregory Clay

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.