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
July 14, 2011 – Wild Fed Days = Adjustment
A WILD FEW DAYS = ADJUSTMENT
Good Evening Troops,
Another wild couple of days. For a variety of reasons, primarily because of other country’s problems, people decided to rush into gold. Our GLD ETF stock bounced up pretty quick – quicker that what we expected. The result – we had to adjust our August Core GLD Iron Condor.
When GLD hit our GTFO delta trigger (.22), we closed the 161/163 bear call spread for $.32 and rolled it out to the August 169/171. We caught it pretty early and are still positive in the position, but not by much (.05). At least we’re not negative.
One thing I’m going to explore is whether or not our same GTFO trigger points will apply to a two or three point spread as it does to our usual 10-point credit spreads. I don’t think we’ve had to adjust a smaller credit spread yet. I’ll let you know the answer.
With the market so volatile right now, it’s tough to find good non-directional position. The VIX is about 20.80, so there’s some premium out there. Now, it’s just a matter of finding a fit.
Weekly Trade Ideas
I’m sure glad we took profits on our Weekly SPY butterfly position a few days ago. We made a nice profit and didn’t have to endure the past two days. But, with the increased volatility, we would have brought in more profit. There’s a value to peace of mind. The market could very well have gone in the opposite direction, taking our profits with it.
Weekly Trade Idea #1 – SPY Put Butterfly – 130.81
It worked last week. What the hell – let’s give it another try with another bearish put butterfly – and see what happens. We’re going to look for an early exit, if possible, and try to lock in some nice profits. With SPY at 130.81, let’s:
Buy 5 SPY Weekly (7/22) 130 puts
Sell 10 SPY Weekly (7/22)128 puts
Buy 5 SPY Weekly (7/22) 126 puts
Debit of about $.25-$.26 ($125-$130)
Weekly Trade Idea #2 – IWM Iron Condor – $82.26
For those who lean toward a non-directional point of view, let’s take advantage of the slightly higher volatility. With the IWN (tracks Russell 2000), let’s:
Sell 10 IWM Weekly (7/22) 77 puts
Buy 10 IWM Weekly (7/22) 74 puts
Credit of about $.10-$.11 ($100-$110)
Sell 10 IWM Weekly (7/22) 85 calls
Buy 10 IWM Weekly (7/22) 88 calls
Credit of about $.19 ($190)
Total net credit and profit potential of $.30 ($300). Maximum profit range is 77 to 85. Maintenance is $3,000.
Remember to be careful, be conservative and be flexible. Watch the futures to get an indication of possible market direction. A gap open may make the above position ideas completely invalid – or you may want to adjust the strikes to more reasonable levels. Adjust the number of contracts to your account size and risk tolerance.
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OPEN CORE PORTFOLIO POSITIONS
Core Portfolio July Position #1 – RUT Sweet-Spot Condor – 823.32
On 5/27, we bought 2 RUT July 740 puts, sold 10 RUT July 730 puts, bought 8 RUT July 710 puts. We also bought 2 RUT July 900 calls, sold 10 RUT July 910 calls and bought 8 RUT July 930 calls for a net credit of $1,290. Maintenance is $16,000.
Core Portfolio July Position #2 (Supplemental) – RUT Iron Condor – 823.32
On 6/6, we sold 10 RUT July 710/700 bull put spreads for $.65 ($650). We also sold 10 RUT July 870/880 bear call spreads for a credit of $.65 ($650). Net credit of $1.30 ($1300). Maximum profit range is 710 to 870. The maintenance is $10,000. Closed 870/880 bear call spread for $1.75. Rolled to August 930/940 for $.60
Core Portfolio August Position #1 – GLD Iron Condor – 154.54
On 7/11 we put on a 40-contract 142/140 bull put spread and 161/163 bear call spread for a net credit of $.26. Max. profit range of 142 to 161. Maintenance is $8,000. On Wed. 7/13, we closed the 161/163 bear call spread for debit of $.32 and rolled it out to the August 169/171 bear call for credit of $.11. New max profit range is 142 to 169. The maintenance is still $8,000. Revised net credit is $.05.
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EDUCATIONAL POSITION PORTFOLIO
This portfolio highlights trades using alternative strategies – beyond our standard Iron Condor and basic credit spreads.
WEEKLYS
UPSIDE
Educational Portfolio #1 – FFIV SRS Ratio Spread – 110.96
On 2/11, with FFIV at about $126.50, we bought one April FFIV 125 call and sold one April FFIV 135 call for a debit of $4.50. We now own 200 shares of FFIV at an average cost per share of $107.50. Sold 2 July $100 calls for $7.80.
Educational Portfolio #2 – AAPL Beat-the-Bank (Long Term) – 357.77
On 4/27, with Apple about $348, we sold 10 January 2012 235/225 bull put spreads for $.83 ($830). Maintenance is $10,000. Get comfortable. We’ll be in this one for a long time.
Educational Portfolio #3 – BIDU Diagonal Calendar – 140.82
On 5/18, with BIDU near 132, we bought two Jan. 2012 110 calls for $31.55 ($6310), sold one June $140 call and one June $145 call for a total of $4.75 ($475). This is similar to a covered call position, using the Jan. 2012 call instead of owning the stock. Below is a recap of the position over the past seven weeks.
1 – Bought two BIDU January 2012 January 110 calls for $31.55 each
2 – Sold one BIDU 135 call @ $2.51 credit
3 – Sold one BIDU 140 call @ $1.46 credit
4 – Rolled one July 135 call to August 140 call @ $2.70 credit (current)
5 – Rolled one July 140 call to August 145 call @ $2.00 credit (current)
Educational Portfolio #4 – SPX “Sure Thing” Spread – 1308.87
On 6/17, we sold two July SPX 1310 calls and bought two July 1330 calls for a net credit of $7.20. Maintenance is $5,000 ($2,500 per contract).
The market reversed itself, going from a bearish trend to a bullish trend. We had to close the SPX July 1310/1330 bear call spread (at $14.10). We then established a four contract August 1305/1280 bull put spread for a $7.10 credit. Maintenance is now $10,000.
DOWNSIDE
None
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ZERO PLUS POSITION – Stay Tuned . . . Exploring Potential Positions
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ONGOING LONG-TERM PORTFOLIO (Background & Results)
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. After June’s 100% profitable trade, our new cash total is $82,330 ($81,180 + $1,150).
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Myrtle Beach
If you’re interested in vacationing on beautiful Myrtle Beach, check out this site: www.mymyrtlebeachcondo.webs.com. I have an oceanfront condo there you would really enjoy. Check out the photos and description. It’s peaceful. It’s relaxing and it’s right on the ocean. Give me a call if you’re interested or have any questions. (248-435-4188). It has free internet, so, yes, you can trade there.
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RECENTLY CLOSED EDUCATIONAL POSITIONS
SPY Weekly Butterfly
On 7/8 we put on a 5/10/5 contracts of the July Weekly 134/132/130 put spread for a debit of $.22 ($110). Closed 7/12 for credit of $.60. Profit of $.38. 173% ROR
Weekly Position #1 – SPX Bull Put Spread
On July 1, sold one SPX Weekly (7/8) 1285 put and bought one SPX Weekly (7/8) 1265 put for a net credit of $1.40 ($140/contract). Expired 100% profit of $140 = 8.5% ROR.
JOYG SRS Ratio Ladder Spread – 98.91
On 4/29, with JOYG at about $99.85, we bought one JOYG July $97.50 call and sold one JOYG July $105 call for a debit of $3.60. Then, we sold one July $87.50 and one July $85 put for a total credit of $3.60. Initial maintenance is about $2,086. Closed 7/7 for net profit of $2.02.
NKE SRS Ratio Ladder Spread – 91.74
On 2/16, with NKE at about 86.15, we bought one NKE July $85 call and sold one NKE July $90 call for a debit of $2.30. Then, we sold one NKE July $75 put and one NKE July $70 put for a credit of $2.30 – a wash. Initial maintenance is about $1,690. Closed 7/7 for net profit of $4.85.
AAPL Weekly Iron Condor
On 6/24 we sold 5 AAPL Weekly 345/350 bear call spreads for $.25 and sold 5 AAPL Weekly 310/305 bull puts for $.25. Total net credit is $.50 ($250). Max profit range is 310 – 345. Options expired 100% profitable. Net Profit of $250 – 11% in a week.
Educational Portfolio – AMZN SRS Ratio Spread
On 6/27 we bought the AMZN August $195/$205 bull call spread and sold two $170 puts to pay for it. Net debit of only $.10. Closed 6/29 for a Net Profit of $2.40 ($240)
SPX Weekly – Bull Put Spread
On 6/17, we sold one Weekly SPX 1315/1335 bull put spread for a net credit of $1.90. Maintenance is $2,000 per contract. Closed 6/23 for $.05. Net Profit of $1.85 ($185)
Educational Portfolio – UUP SRS Ratio Strategy
On 10/25, we sold two June UUP $21 puts, bought one $22 call and sold one $24 call for a debit of $.10. Maintenance is $670. This is a bet on the strengthening of the dollar in the next six months. All options expired worthless. Cost was only a dime.
Educational Portfolio – SPY Butterfly
On 6/8 with the SPY at 129, we put on a 5/10/5 128/126/124 put butterfly for a debit of $.28 ($280). Closed 6/15 for $.62, a net Profit of $.34 – a double.
Educational Portfolio – V Put Ratio Ladder Spread
On 3/14, with V at about $71.50, we bought one V June $75 put and sold one V June $70 put. Then, we sold one June $65 put and sold one June $60 put for a net credit of $.71. Initial maintenance is about $1,600. Closed 6/15 for a total net Profit of $1.31.
AAPL Weekly Iron Condor
We sold 10 Apple 330/325 bull put spreads and 10 Apple 360/365 bear call spreads for a credit of $.68. Maintenance is $5,000. On 6/10, closed at $1.39. Net loss of $.71 ($710).
QQQ Weekly – Boston Strangle
On 5/27, with the QQQ at about $57.35, we bought 10 QQQ Weekly $58 puts and bought 10 Weekly $57 calls for a debit of $1.47. Risk is only $.47 ($470). Closed 6/1 for $1.49, just over breakeven.
SPX Weekly – SPX Weekly Bull Put Spread
On 5/20 we sold 10 SPX Weekly 1300 puts and bought 10 SPX 1290 puts for a credit of $.50 ($500). The maintenance $10,000. Profit of $500 = 5.26%
Educational Portfolio – OIH SRS Spread
On 5/23, with OIH about 145, we bought the July 144/150 bull call spread and sold the July 135 put for a net credit of $.10. Closed 5/27 for net Profit of $2.95.
QQQ Weekly – QQQ Weekly Boston Strangle
On 5/20, we bought 10 Weekly QQQ 59 puts and bought 10 QQQ 58 calls for a debit of $1.57. Risk is $.57 ($570). Closed 5/23 for a Profit of $1.36 = 238% over the weekend.
SPX Weekly – Bull Put Spread
On 5/5, with the SPX at about 1351, we sold a 1375/1400 bear call spread for a credit of $1.35. Maintenance is $2,500 per contract. Closed 5/11 for $.10. Net Profit of $1.25
Educational Portfolio – AMZN SRS Ratio Spread
On 5/9, we bought one July 195/205 bull call spread and sold two July 175 puts for a net debit of $.10. On 5/12, we closed the position for a net Profit of $2.35 in only four days!
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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 2010 and are doing well in 2011, particularly with the new strategies we have introduced last year. 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.
