Terry’s Tips Track Record Update on January 16, 2010

First, we would like to note that our performance figures include full commissions on actual accounts carried out at thinkorswim.  Many option newsletters do not count commissions in their reporting.  This is a huge mis-representation of their results because commissions on option portfolios might be as high as 30% or more of invested capital in a single year.  For many of these newsletters, it is very likely that any gains reported before commissions would disappear entirely if commissions were properly accounted for.

Notes:   The only significant losing portfolio for the six-month period was the Big Bear Mesa which is our only primarily bearish portfolio which is set up to make gains if the market is flat or goes down.  Over the six-month period, the market went steadily up and this portfolio suffered.

Our six bullish portfolios gained an annualized 51% for the last six months.  Including the bearish Big Bear Mesa, the annualized gain was 36%.

At the end of each expiration month, if the portfolio value is 3% higher than the portfolio’s original starting value ($5,000 for most portfolios, $10,000 for Boomer’s Revenge), we withdraw cash in increments of 3% so that new subscribers can mirror the portfolios for approximately the original starting value.  The Big Dripper portfolio has a different cash withdrawal policy - $150 is withdrawn each month regardless of how much the portfolio earns.

The Gold Bug Portfolio:   Three months ago, we started a new portfolio for subscribers who believed the price of gold was headed higher.  The Gold Bug portfolio (based on GDX, an ETF of gold mining companies) started with $5,000 and experienced wide swings in value as the price of gold fluctuated widely, first up, and then down.  Over the last three weeks, GDX fell by 18%, an amount that our strategy just cannot tolerate, especially while we are positioned to do the best if the stock goes up.  Over the three months, the Gold Bug portfolio has lost 15.6% of its value because of the big drop in the price of GDX.

Our Strategies:  We employ two different strategies in the actual portfolios carried out at Terry’s Tips.  The Mighty Mesa Strategy uses calendar spreads at several stock prices with the long side of the spreads typically having 3 – 5 months of remaining life.  Each month, a mesa-shaped risk profile graph is set up that shows possible gains coming over a fairly wide range of possible stock prices.

The 10K Strategy also starts out with calendar spreads at several different strike prices, but uses true LEAPS for the long side (one or more years of remaining life).  When expirations come along, many of the short options are moved to a different strike price to gain maximum decay benefits, and the portfolios end up being comprised of mostly diagonal spreads rather than calendar spreads.

Check Back Often:  Every month during the last week of the calendar month, this Track Record page will be updated, and a new six-month cumulative table displayed.

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