TESTIMONIALS . . .
Mike – There is not a day that goes by that we do not think of you and are thankful for the introduction to this world of non directional trading. I urge all traders to take your course and then begin to think and trade for themselves – and use the creative license you allowed us to receive. – Ron
Mike – You should be very proud of your performance, and I just wanted to thank you for teaching me your strategies. – Lee
Mike – I fully value and appreciate your candor, strategies and insight. You simplify what others try to complicate. I have gleaned a wealth (full pun intended) of information from both your newsletter and class. – Gene
January 21, 2009 – New Zero Plus Position
VOLATILITY IS BACK!
NEW ZERO PLUS POSITION
By Mike Parnos
It was just a matter of time. Sooner or later the market was going to have to pull back — and the last two days are a good start. Today alone, the VIX moved up big (3.59) to 22.27.
NEW ZERO PLUS POSITION
You may think I’m nuts, and you wouldn’t be the first, but I’m going to suggest what I believe to be a pretty conservative position for our Zero Plus Strategy. The weird part is that it is for the March option cycle. So, we’ll wait a while.
With the RUT at 628.36 let’s:
Sell 20 RUT March 520 puts – RUWOD – Delta: .08
Buy 20 RUT March 510 puts – RUWOB
Credit of about $.55 ($1,100)
Sell 15 RUT March 700 calls – RUTCT – Delta: .08
Buy 15 RUT March 710 calls – RUTCB
Credit of about $.55 ($825)
Total credit and maximum profit is $1,925. Our maximum profit range is 520 to 700. The maintenance is $20,000. Notice that the upside cushion is only about 72 points. That’s not a lot for waiting two months. That’s why I reduced the number of contracts for the bear call spread to 15 (instead of 20). Just a little less exposure on the top side.
Based on Thursday’s closing prices, we should have a decent shot at getting fills at these prices. Don’t get greedy. Watch the futures tomorrow morning. If it looks like a big move is in the offing, hold off putting on the trade until you get a feel for what’s happening.
Some subscribers may use this position for their core portfolio. I have no problem with that. The Deltas line up. It’s just a matter of being patient. Not all of us are that patient or want to be that patient. It’s only 11 short weeks. It’s a trade-off. You have to be willing to be exposed to the market a little longer to get reasonable premium and reasonable cushions.
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FOR THE HELL OF IT . . .
Just for the hell of it, this afternoon I went to one of those two hour free seminars here in the Detroit area. This one was put on by Rich Dad Poor Dad. I sat there for about 2 1/2 hours while this fast-talking 30-year-old rattled off a little education and dozens of reasons the attendees should come to a three day seminar. I felt like I was listening to a used car salesman.
Three days! That’s a long time for any seminar. The seminars I teach are two days long and we’re all exhausted by the end of the second day. I can only imagine what would be left of a beginning trader after three days of learning. Serious overload — even if they only teach the easier strategies they talked about.
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FEBRUARY CORE PORTFOLIO POSITION
February Position #1 – RUT Iron Condor – 628.36
On 1/11, with the RUT at 644.56, we sold 10 February RUT 560 puts and bought 10 February RUT 550 puts for a credit of $.45 ($450). On 1/12 we sold 10 RUT January 700 calls and bought 10 RUT February 710 calls for a credit of $.60 ($600). Total net credit of $1.05 ($1,050). Maintenance is $10,000.
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EDUCATIONAL POSITION PORTFOLIO
This portfolio highlights trades using alternative strategies – beyond our official Iron Condor and basic credit spreads.
Educational Position #1 – We are now looking for new Educational Portfolio Positions
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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 recent profits, our cash total is $77.990 ($76.890 + $1,100)
ZERO PLUS POSITION –
We are now looking for a new Zero Plus position. See suggested position in article above.
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RENEWAL REMINDER . . .
The renewal process is pretty simple. We’ve done quite well this past year. More than likely, you will likely want to continue to receive our thoughts, insights, ideas and trade suggestions. We had a successful 2009 and we look forward to doing even better in 2010.
When your renewal date is hit, your subscription will automatically be renewed based on the information you provided me 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. As your subscription is renewed, I will send you a confirmation email. 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 only at Traders Press. 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’ 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.
