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
October 3, 2010 – A Full Week Of Data
A WEEK FULL OF DATA
Happy Sunday!
The market struggled early in the day on Friday, then moved up towards the close. The indecisiveness in the morning allowed us to put on a few of the positions we discussed in Thursday’s column.
We filled our Nov. Core Portfolio RUT position and saved a couple of bucks putting on the Batman put and call wings (see details below). With the market poised to move up, we’ll keep a close eye on this position, particularly the call side.
In our Educational Portfolio we managed to put on an XEO Weekly Siamese Condor with a credit of $9.50. Hopefully, the market will rest and time decay will provide us with some profit in the next few days.
We also put on our January Apple ratio put spread. There’s not much risk here and it’s likely that the market will pull back at some point. We’re in a position to profit — IF Apple takes a short trip south and tests the recent straight up move.
There’s going to be a lot of data next week with a big jobs report on Friday. There will probably be some interesting reactions to the numbers. Don’t forget that earnings are coming up as well. There never seems to be a lack of information. It just makes you scratch your head when you see how the market reacts — even to poor economic numbers.
The economy still sucks and unemployment is high, but traders are seeing only what they want to see and hearing only what they want to hear. Sounds like life, doesn’t it? Reality is rarely a priority.
Remember, it’s not the cards you’re dealt in life — it’s how you play them.
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Very , very interesting, scientifically proven………………
Six Truths in Life
1. You cannot stick your tongue out and look up at the ceiling at the same time, a physical impossibility.
2. All idiots, after reading #1 will try it.
3. And discover #1 is a lie.
4. You are smiling now because you are an idiot.
5. You soon will forward this to another idiot.
6. There is still a stupid smile on your face .
I sincerely apologize about this, but I’m an idiot and I needed company. You now have two options…delete it, or send it along to put a smile on someone’s face today. Another idiot, have fun.
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CORE POROLIO POSITIONS
Core Portfolio October Position #1 – RUT Batman Condor – 679.29
On 9/1, with the RUT at about 602, we sold 10 RUT Oct. 490 puts, bought 11 RUT Oct. 480 puts and sold one RUT Oct. 460 puts for a credit of $465. We also sold 10 RUT Oct. 700 calls and bought 11 RUT Oct. 710 calls and sold 1 RUT Oct. 730 call for a net credit of $575. Total net credit of $1,045.
On 9/21, we closed the bear call spread for a debit of $1.95. Then, we closed the bull call spread for a credit of $1.85. In the overall position, we still have a debit of $735.
On 9/22, we established a new Iron Condor, selling 10 RIT Oct. 590 puts and buying 10 580 puts for a credit of .65 ($650). We also sold 7 Oct. RUT 720 calls and bought 7 730 calls for a credit of $.70 ($490). Total net credit of $1,140.
Core Portfolio November Position #1 – RUT Batman Condor – 679.29
On 10/1, with the RUT at about 675, we sold 10 Nov. 560 puts and bought 10 Nov. 550 puts for a credit of $.75 ($750). We also sold 10 Nov. 760 calls and bought 10 Nov. 770 calls for a credit of $.70 ($700). We bought the 550/530 put Batman Wing for only $.90 and the 770/790 call Batman Wing for $1.05. Our net credit $1,260.
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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 – SOX SRS Ratio Strategy – 348.06
On 9/27, with the SOX (Semiconductor Index) at 346, we bought one November SOX 340 call and sold one November 360 call for a debit of $10.20. To pay for this bull call spread, we sold two November SOX 310 puts for $5.00 (x 2 = $10). Net debit for entire position is $.20 ($20 per contract).
Educational Portfolio #2 – MS SRS Ratio Strategy – 25.02
On 9/27, with MS (Morgan Stanley) at 25.15, we bought one Nov. MS $25 call and sold one MS Nov. $28 call for a debit of $1.10. To pay for this bull call spread, we sold two Nov. MS $22 puts at $.47 (x 2 = $.94). Net debit for entire position is $.16 ($16 per contract).
Educational Portfolio #3 – RIMM Ratio SRS Strategy – 50.21
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 #4 – C Covered Call – 4.09
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 #5 – Ford Ratio SRS Strategy – 12.26
With Ford at $11.75, we bought 5 March 2011 $11 calls and sold 5 Ford March 2011 $14 calls for a cost of $1.30. To pay for this bull call spread we sold 10 March 2011 Ford $10 puts for a credit of $1.58 ($.79 x 2). There is a net credit is $.28 or $28 per contract.
Educational Portfolio $6 – XEO Weekly Siamese Condor – 517.22
With the XEO at about 515, on 10/1, we sold one XEO Weekly 515 call and one put for a total of $10.50. We bought one 535 call and one 490 put for a total of $1.00. Our net credit is $9.50. Our exit parameters are 524.50 and 505.50.
Educational Portfolio #7 – AAPL Ratio Put Spread – 282.52
On 10/1, with Apple at about 284, we bought a January $280 put, then sold one $260 put and one $250 put for a net credit of $.15. We are in a position to profit if Apple drops below $280 all the way down to $260.
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“TASTY” TRADE IDEAS PORTFOLIO
Idea #1 – YUM SRS (Stock Replacement Strategy) – 46.48
On 9/12, with YUM at about 44.75, we sold 2 YUM Jan. 2011 $40 puts for a net credit of $2.74. We bought 1 YUM Jan. $43 call and sold 1 YUM Jan. $48 call for debit of $2.46. Net is a credit of $.28.
Idea #2 – BWLD SRS Ratio (Stock Replacement Strategy) – 48.63
On 9/12, with BWLD at about $47.9, we sold 2 BWLD Dec. $40 puts for a net credit of $2.00. We bought 1 BWLD Dec. $46 call and sold 1 BWLD $50 call for a debit of $1.95. Net is a credit of $.05.
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RECENTLY CLOSED EXPERIMENTAL POSITIONS
Educational Portfolio – SPX (S&S) Weekly
On 9/3, with SPX at 1102, we sold 1 SPX Weekly 1075 put and bought 2 SPX Weekly 1050 puts for a net credit of $2.10. We placed an order to close the position for $.40. On 9/8 our order was filled at $.40 and we locked in a 7.3% return on our risk. PROFIT: $170 per contract (in three trading days)
Educational Portfolio – QCOM SRS October Position
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). On 9/8, closed position for a net PROFIT: $1,710
Educational Portfolio – SPX Short & Sweet Weekly
On 8/20 we sold one SPX Aug. (8/26) weekly 1100 call and bought one SPX Aug. (8/26) weekly 1125 for a net credit of $1.80. On 8/24, we closed the position for $.17, locking in a 7% return on risk. PROFIT: $167 per contract. (in less than 3 trading days).
Quickie (August) – XEO Siamese Condor
On 8/13, we sold 2 August XEO 490 puts and sold 2 August XEO 490 calls for a credit of about $13.10. Then we bought 2 August 450 puts and buy 2 August 530 calls for a debit of about $.70. The net credit is $12.40 ($13.10 – $.70) or a potential $2,480 for two contracts ($1,240 x 2). On 8/17 we bought back the short options for $9.30, locking in a profit of ($3.10 x 2). PROFIT: $620 (in less than 3 trading days).
Educational Portfolio – AAPL Beat The Bank
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. Closed on 8/3 for $.14, locking in a $.56 profit. PROFIT: $.56 ($2,800)
Educational Portfolio – BP SRS July Position
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. RESULT: Break even.
Educational Portfolio – 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).
Educational Portfolio – Apple SRS Strategy
On 8/30, with AAPL at $241, we sold 2 Apple Jan. 2011 $190 puts for a total of $11.50. We then bought one Apple Jan. 2011 $240 call and sold one Apple Jan. 2011 call for a debit of $9.10. Net credit if $2.40 ($240). Closed on 9/16 for net credit of $12.30. PROFIT: $1,230 (per contract in less than 3 weeks).
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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 $2,075, our new cash total is $81,180 ($79,105 + $2,075).
ZERO PLUS POSITION – We are currently scouting 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.
