Where Directional Traders Come to be Cured

August 3, 2010 – Market Poised to Move

MARKET POISED TO MOVE

 Hello Team,

Our two August Core Portfolio positions are in good shape – at least for now.

With the market moving back up, let’s take a closer look at some of our Educational Portfolio positions.  This might be a good time to GTFO (in a positive way) and lock in some nice profits.  It’s sweet music to our ears. 

RIMM Educational Position

Have you noticed how RIMM has quietly worked its way back up to a level that may enable us to be profitable.  In this case, patience may eventually pay off.  RIMM closed at 55.53, just a few bucks short of our long December $57.50 call.  Actually, it was up there yesterday and pulled back a little today. 

QCOM Educational Positon

QCOM has performed similarly to RIMM.  It has come back up 38.46 and is poised to make us some money – IF it continues higher.  We own the October $39 call.

AAPL Educational Beat The Bank

We initiated this position to safely beat the miniscule returns conservative traders are getting in Money Market accounts and CDs.  We took in $.70 on May 24th.  We can now close the position for about $.14.  It means we can lock in 80% ($2,800) of the profit in about 2 1/2 months.  Why wait for another almost 5 months for the last $.14?  There’s not really a chance that we’ll lose anything, but a lot of money ($50,000) is tied up for maintenance.  Maybe we can put that money to better (and still safe) use in another Beat The Bank trade.

Goodbye Educational BP

We decided to close our BP Educational Portfolio position.  When it hit $40 today, we sold the 200 shares that were put to us a few weeks ago.  There are other opportunities out there that are more appealing.

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A Few More Weekly Options

The following stocks and ETFs now have weekly options available that expire on August 6.  The CBOE has added a few since we published our previous list.

ETFs

EEM – iShares MSCI Emerging Markets Index

FAS – Direxionshares Daily Financial Bull 3X Shares

FAZ – Direxionshares Daily Financial Bear 3X Shares

GLD – ishares SPDR Gold Trust IWM – iShares Russell 2000 Index Fund

QQQQ – Nasdaq-100 Index Tracking Stock

SPY – S&P 500 Depositary Receipts

USO – United States Oil Fund

XLF – Financial Select Sector SPDR

Stocks

AAPL – Apple

AMZN – Amazon

BAC – Bank of America

BIDU – Baidu

BP – British Petroleum

C – Citigroup

CSCO – Cisco Systems

DNDN – Dendreon

F – Ford Motor Company

GE – General Electric

GOOG – Google

GS – Goldman Sachs

PFE – Pfizer

RIG – Transocean

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CORE PORTFOLIO POSITION
Core Portfolio August Position #1 – RUT Batman Iron Condor – 655.66

On 7/9, with the RUT at about 620, we sold 10 August RUT 500 puts, bought 11 August RUT 490 puts and sold 1 August RUT 470 put.  Net credit is $500.  We also sold 10 August RUT 700 calls, bought 11 August RUT 710 calls and sold one August RUT 730 call for a net credit of $515.  Total net credit and profit potential is $1,015.  Maintenance is $10,000. Maximum profit range is 500 to 700.  On 7/27, closed 700/710 bear call spread for debit of $1.80.  We closed the single 710/730 bull call spread for $1.80 ($180).

Core Portfolio August Position #2 – SPX Bull Put Spread – 1120.46

On 7/28, with the SPX at about 1109, we sold 10 August SPX 1015 puts and bought 10 August SPX 1005 puts for a net credit of $.65 ($650).  Maintenance is $10,000.
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EDUCATIONAL POSITION PORTFOLIO
This portfolio highlights trades using alternative strategies – beyond our standard Iron Condor and basic credit spreads.  
  
Educational Portfolio #1 – QCOM SRS October Position – 38.46
On Monday, 3/15, with QCOM at 38.95, we sold 10 Oct. QCOM 33 puts, bought 10 Oct. QCOM 39, and sold 10 Oct. QCOM 44 calls for a debit of $.50 ($500).
 
Educational Portfolio #2 – AAPL Beat The Bank – 261.93

On 5/24, with Apple at about 240, we sold 50 January 2011 120 puts and bought 50 January 2011 110 puts for a credit of $.70.  This is a hands-off position that will generate a return of about $3,500 on a $50,000 investment.  Beats the hell out of the bank.
 
Educational Portfolio #3 – BP SRS July Position – 40.00
On 5/17, with BP we sold two BP July 40 puts.  We then bought 1 BP July 45 call and sold 1 BP July 49 call – all for a credit of .01 ($10).  We now own 200 shares of BP with a cost basis of $40.  On 8/3, sold 200 shares at $40 and broke even on the trade.

Educational Portfolio #4 – RIMM Ratio SRS Strategy – 55.53
With RIMM at $59.11, we bought 5 December RIMM $57.50 calls and sold 5 December RIMM $67.50 calls for a cost of $4.40.  To pay for this bull call spread we sold 10 December $42.50 puts for a credit of $4.10 ($2.05 x 2). Net debit for the entire position is $.30 = $150.

Educational Portfolio #5 – C Covered Call – 4.13

On 6/30, bought 1,000 shares of Citigroup at $3.81 and sold 10 January 2011 $4 calls bringing in $.53 ($530).  Long term conservative play.

Educational Portfolio #6 – SPX Short & Sweet Weekly

On 7/23 we sold one SPX July (7/29) weekly 1050 put and bought one SPX July (7/29) weekly 1025 for a net credit of $1.90.  We also placed an order to close the position for a debit of $.40.  We’ll let time decay do the work for us.  On 7/26, closed spread for $.35.  PROFIT: $1.55 ($150 per contract).

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ONGOING LONG-TERM PORTFOLIO
This portfolio highlights long-term positions that we monitor for conservative traders. 
 
A few years ago, I outlined a Zero-Plus 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’ve been 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 this month’s profit of $2,040, our new cash total is $79,105 ($77,065 + $2,040).
 
ZERO PLUS POSITION - 

We are currently looking for a new Zero Plus Position. ______________________________________________________________

Renewal Process
The renewal process is pretty simple.  We’ve done quite well this past year.   More than likely, you will want to continue to receive our thoughts, insights, ideas and trade suggestions.  We had a successful 2009 and are doing well in 2010.
When your renewal date is hit, your subscription will automatically be renewed based on the information you provided when you originally subscribed.  The rate has not changed.  It’s still less than half the profit of a single trade.  You will continue to receive all the subscriber benefits for the same low bargain price ($495) as last year.  Thanks to all of you who make this job a labor of love.
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OPTION PROFITS: The Naked Truth
My book “Option Profits: The Naked Truth” are now available at Traders Press and Amazon.com.  The link to Traders Press to order the book is:

http://www.traderspress.com/detail.php?PKey=628
 
View the table of contents, a preface and actual reviews of the book (I’ll give you a hint: – they like it – a lot).  Check it out.
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Disclaimer   
Opinions and information in this newsletter are provided for educational purposes only.  No statement in the newsletter should be construed as a recommendation to buy or sell a security or to provide investment advice. It is possible at this or some subsequent time, the editors or staff of Mike Parnos’ Options Newsletter may own, buy or sell securities discussed.  All investors should consult a qualified professional before trading in any security. Stock and option trading involves risk and are not suitable for all investors. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness.