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  • 1. All About Stock Options

    1. All About Stock Options

    My goal is to give you a basic understanding of what stock options are all about without hopelessly confusing you with unnecessary details. I have read dozens of books on stock options, and even my eyes start glazing over shortly into most of them.

  • 2. Check Out Auto-Trade

    2. Check Out Auto-Trade

    Auto-Trade is a service offered by several on-line brokers. Auto-Trade makes it possible for an investor to carry out an options strategy in his own account without becoming an options guru or making all the trades on his or her own.

  • 3. Never Buy a Mutual Fund

    3. Never Buy a Mutual Fund

    Never buy a mutual fund unless it is a no-load index fund with the lowest cost structure. (I will tell you where to find it later.)

  • 4. Turbocharge Your IRA

    4. Turbocharge Your IRA

    Most smart people have set up a Roth IRA, 401(k), or other qualified retirement program. For some of them, it may be the only stock market investment they own.

  • 5. Double Your Money the Lazy Way

    5. Double Your Money the Lazy Way

    In spite of the odds against winning, many people seem to like to invest in individual stocks – sort of like picking horses at the race track.

  • 6. The 10K Strategy

    6. The 10K Strategy

    The 10K Strategy is my favorite investment strategy. I have used it to make an average of over 50% a year for three out of four consecutive years. I have now added a twist to the strategy so that annual returns might be less than those years but there should be a much higher likelihood of its succeeding.

  • 7. Trading ETF Options

    7. Trading ETF Options

    Exchange-Traded Funds, or ETFs, are index funds that trade just like stocks on major stock exchanges. All the major stock indexes have ETFs based on them, including: Dow Jones Industrial Average (DIA), Standard & Poor's 500 Index (SPX), and Nasdaq 100 Composite (QQQQ).

  • 8. Other Stock Option Resources

    8. Other Stock Option Resources

    Learn about some of my favorite stock option resources.

Get ahead in the market.

Terry’s Tips carries out an options strategy designed to significantly outperform the market and other conventional investments.

The strategy does not require picking the right stocks or timing the market. It primarily trades options on the S&P 500 (SPY) and can be used in an IRA.

Terry's Tips Stock Options Trading Blog

February 10, 2019

Can Microchip Technology (MCHP) Maintain its Post-Earnings Momentum?

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum. Our actual portfolio carried out at Terry’s Tips which trades these weekly ideas has gained 114% in the first five weeks of 2019.  This portfolio also made over 100% in 2018 and we withdrew the starting investment amount so that we are playing entirely with profits at this time.  Of course, there is no certainty that we can duplicate this success in the future, but we feel pretty good about our prospects.

Terry

Can Microchip Technology (MCHP) Maintain its Post-Earnings Momentum?

Microchip Technology saw its stock price rally just over 10% prior to pulling back as investor optimism grew following their earnings report in the past week.  Just to be clear, the report was not as upbeat as expected.  Actually, the stock had turned down initially, but it was a prediction from the company Chief Executive that caused investors to change their view and start buying.  It’s a rather interesting turn of events and the following two articles explain why the markets have put so much weight to his prediction, and why the stock may continue to rise from here – Microchip’s stock soars after CEO calls for a bottom, and he’s been right before and Microchip: A Bottom Is Possibly In.

 

The push higher following earnings led to a signifcant technical break as the stock was pressed against a confluence of resistance prior to it.  Resistance comes from the 200-day moving average as well as a declining trendline drawn from the June top.  The stock price has pulled back a bit from horizontal resistance found at $89.20 that was a prior low and prior resistance following a gap down last summer.  Support is found just above $85.  In the even the support level does not hold, stronger support is found at the prior breakout point.  Considering the significance of the technical break, bulls are likely to defend any dips in the near-term.

[caption id="attachment_2333" align="alignnone" width="300"]MCHP Chart February 2019 MCHP Chart February 2019[/caption]

*source Tradingview.com

If you agree there's further upside ahead for MCHP, consider this trade which is a bet that the stock will continue to advance over the next five weeks, or at least not decline very much.

Buy To Open MCHP 15MAR19 85.00 Puts (MCHP190315P85.00)
Sell To Open MCHP 15MAR19 87.50 Puts (MCHP190315P87.50) for a credit of $1.10 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when MCHP was trading near $87.50.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $355.50 and your broker would charge a $1000 maintenance fee, making your investment $644.50 ($1000 – $355.50).  If MCHP closes at any price above $87.50 on March 15, both options would expire worthless, and your return on the spread would be 55% (627% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

[caption id="attachment_2334" align="alignnone" width="181"]IBD Underlying Updates February 7, 2019 IBD Underlying Updates February 7, 2019[/caption]

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

February 3, 2019

PayPal (PYPL) Dips After Earnings, Is it a Buy?

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Terry

PayPal (PYPL) Dips After Earnings, Is it a Buy?

After briefly piercing to record highs, PayPal stock declined following its earnings report in the past week.  Is the dip a buying opportunity? The following article provides some solid arguments for why it is – Buy the Dip in Paypal Stock Because $100 Is the Next Stop.  Also an article recently published on The Motley Fool makes a compelling argument for growth on the back of rising popularity and potential for PayPal’s app Venmo.  In the article, the company’s CEO was quoted as saying the P2P payment app could potentially surpass PayPal’s payment system in profitability – The Big News in PayPal’s Fourth-Quarter Update.

Aside from chart patterns, a significant appeal to PYPL is that it touched record highs this month, fully erasing the prior decline.  Not only that, it was the first IBD Top 50 listed stock to do so while most have only recovered a part of the fall that took place late in 2018.  In this context, it is certainly an outperformer.  Support is found at $87.55 as a horizontal level there has previously acted as both support and resistance dating back to June last year.  Note that this level was a major barrier in the fourth quarter.  On a weekly chart, the 20-week moving average was the equivalent barrier for Q4.  It currently falls near $85.50 to provide additional support in the event of further near-term downside.  Just above it, the 50-day moving average is found, currently at $86.14.

[caption id="attachment_2329" align="alignnone" width="300"]PYPL Chartl February 2019 PYPL Chartl February 2019[/caption]

*source Tradingview.com

If you agree there's further upside ahead for PYPL, consider this trade which is a bet that the stock will continue to advance over the next six weeks, or at least not decline very much.

Buy To Open PYPL 15MAR19 87.5 Puts (PYPL190315P87.5)
Sell To Open PYPL 15MAR19 90 Puts (PYPL190315P90) for a credit of $0.95 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when PYPL was trading near $90.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $92.50 and your broker would charge a $250 maintenance fee, making your investment $157.50 ($250 – $92.50).  If PYPL closes at any price above $90 on March 15, both options would expire worthless, and your return on the spread would be 59% (552% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

[caption id="attachment_2330" align="alignnone" width="196"]IBD Underlying Updates February 1, 2019 IBD Underlying Updates February 1, 2019[/caption]

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

January 27, 2019

Is the Earnings Dip in Atlassian Corp (TEAM) A Buy Opportunity?

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

Terry

Is the Earnings Dip in Atlassian Corp (TEAM) A Buy Opportunity?

Atlassian is a well-liked stocked by several analysts, not only because of their business model but also the stock price performance.  Look at what these two analysts are saying about the company – Software Stock Could Surge Into February and Analysts Hold Stances On Atlassian Following A ‘Ripper’ Of A Quarter.

TEAM turned higher alongside the broader markets in late December and briefly pierced to record highs following their recent earnings release, however, the stock closed about 10% lower after the report.  The price action that follows is particularily important as it suggests that bulls remain well in control.  First, the stock failed to make a sustained drop below it’s 20-day moving average.  Also a rising trend channel remains intact and buyers defended the lower bound of the channel following the post-earnings dip.  Lastly, on a weekly chart, TEAM closed at a weekly high for the year in the past week to further support the view that the earnings dip may have been a buying opportunity as opposed to a sell signal.

[caption id="attachment_2324" align="alignnone" width="300"]TEAM Chart January 2019 TEAM Chart January 2019[/caption]

*source Tradingview.com

If you agree there's further upside ahead for TEAM, consider this trade which is a bet that the stock will continue to advance over the next seven weeks, or at least not decline very much.

Buy To Open TEAM 15MAR19 90 Puts (TEAM190315P90)
Sell To Open TEAM 15MAR19 95 Puts (TEAM190315P95) for a credit of $1.93 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when TEAM was trading near $96.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $190.50 and your broker would charge a $500 maintenance fee, making your investment $309.50 ($500 – $190.50).  If TEAM closes at any price above $95 on March 15, both options would expire worthless, and your return on the spread would be 62% (492% annualized).

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

[caption id="attachment_2325" align="alignnone" width="196"]IBD Underlying Updates January 24, 2019 IBD Underlying Updates January 24, 2019[/caption]

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Making 36%

Making 36% – A Duffer's Guide to Breaking Par in the Market Every Year in Good Years and Bad

This book may not improve your golf game, but it might change your financial situation so that you will have more time for the greens and fairways (and sometimes the woods).

Learn why Dr. Allen believes that the 10K Strategy is less risky than owning stocks or mutual funds, and why it is especially appropriate for your IRA.

Order Now

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Sign up for Dr. Terry F Allen’s free newsletter and get immediate access to his most current report on his stock option trading strategies.

TD Ameritrade

This Chicago brokerage firm with the unlikely name thinkorswim, Inc. by TD Ameritrade is considered by many to be the best option-friendly broker. For openers, they have extremely good analytic software and their option trading platform is exceptional. Thinkorswim Mobile has been called the best mobile app in the industry. In 2017, TD Ameritrade received 4 stars out of 5 in the annual Barron`s* Best Online Brokers Survey. TD Ameritrade was tops as an online broker for long-term investors and for novices. The company is the only broker that receives the highest 5.0 score for research amenities among all firms participated in the ranking last year.

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TD Ameritrade, Inc. and Terry's Tips are separate, unaffiliated companies and are not responsible for each other’s services and products.

Options are not suitable for all investors as the special risks inherent to options trading my expose investors to potentially rapid and substantial losses. Please read Characteristics and Risks of Standardized Options before investing in options

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