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
September 29, 2009 – A Day Of Rest
A DAY OF REST
{++Hello Troops,
The market stayed in a pretty small trading range today and ended up a little lower. After yesterday’s advance, it looked like it was about to continue the uptrend. There was a bunch of M & A news new and that has a tendency to generate a bit of excitement, even though it was on low volume. But, that was yesterday. Today, it was a day for the market to rest and absorb mixed economic news.
Early Monday, before the market took off to the upside, we managed to get filled on the Educational October Horatio Put Spread we discussed in Sunday’s column. We didn’t get the $.34 we were hoping for. When I saw the futures up prior to the open, I adjusted the limit order and was content to get filled at $.30. It’s still a very decent trade – with an excellent probability of success.
I’m going to be looking for November trades in the next few days. November is a five-week option cycle. We already have a November Iron Condor position in our Zero Plus Strategy. A number of subscribers put on that trade for their Core Portfolio, which is just fine. However, I’ll be searching for an “official” Core Portfolio position.
In our ongoing Educational SPX Short Straddle position, let’s put on another strangle — this one for the November cycle. We only have traded two contracts in this position, but we are still $12.80 below breaking even. So, looking at the SPX November option chain, tomorrow let’s sell 2 SPX Nov. 920 puts and sell 2 SPX November 1135 calls for a credit of $13.00. If this works out, we will be back to even. Originally, we let this one get away, but we have a very good chance of making up the deficit.
This trade is not for everyone. It requires a great deal of maintenance, unless you have an account with customer portfolio margining (CPM). Be careful. Even if it’s only two contracts, we have seen how not following the trading plan can get us into trouble at times.
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OFFICIAL CORE PORTFOLIO
October Position #1 – RUT Iron Condor – 610.45
On September 9, with the RUT at about 576, we sold 10 October RUT 640 calls and bought 10 October RUT 650 calls for a credit of $.60. Then, we sold 10 RUT October 490 puts and bought 10 October 480 puts for a credit of $.55 ($550). Total profit potential of $1.15 ($1,150).
We closed the RUT 640/650 bear call spread for a debit of $2.70. The bull put spread is still open. We now are looking at a potential loss of $1.55.
On Friday we started to bring some premium back into our account by putting on another bear call spread, the RUT 670/680. Originally, we put the trade out at $.70. We were fortunate that we were filled at $.75. Some subscribers were filled at $.80 for the same strikes as the RUT moved up slightly during the day.
After bringing in $.75, we are only looking at a deficit of $.80. We’ll see what we can do about finding something relatively safe to bring us back into positive territory.
October Position #2 – SPX Iron Condor – 1060.61
On September 23, with the SPX at about 1070, we sold 10 October SPX 985 puts and bought 10 October SPX 975 puts for a credit of $.50 ($500). Then we sold 10 October SPX 1140 calls and bought 10 October 1150 calls for a credit of $.50 ($500). Potential profit is $1.00 ($1,000). 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. Here are the updates. The original positions are below.
OPEN EDUCATION PORTFOLIO POSITIONS
(NEW) HORATIO PUT SPREAD – SPY – 106.00
On 9/28, with the SPY at about 104.90, we bought 100 SPY October 95 puts and sold 300 SPY October 93 puts for a credit of $.30 ($3,000).
SHORT STRADDLE – SPX – 106.00
On 7/8, with the SPX at 875, we sold 2 December SPX 875 puts and 2 SPX 875 calls for a credit of $134.20. After our September short strangle, we’re still under water by $12.80.
CALENDAR SPREAD – QQQQ – 42.22
On 7/6, we bought 10 December QQQQ $34 puts and sold 10 August QQQQ $33 puts for a debit of $1.70. We bought back our $33 put for $.02 and sold the Sept. $34 put for $.24 for a credit of $.22. New cost basis is $1.48 for the December $.34 put.
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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 $75,390 ($74,140 + $1,250)
ZERO PLUS POSITION RESULT – RUT Bull Put Spread – 610.45
On September 23, with the RUT at about 620, we sold 15 November RUT 500 puts and bought 15 November 490 puts for a credit of $.50 ($750). Then, we sold 15 November RUT 710 calls and bought 15 RUT 720 calls for a credit of $.50 ($750). Potential profit is $1,500. Maintenance is $15,000.
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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.
