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Terry's Tips Stock Options Trading Blog

Interesting AAPL Stock Options Strategy

February 21st, 2012

I like Apple. I think the stock will at least hold steady, or might go up over the next month. If it does, I expect to double my money with an options strategy I have just set up. Today I would like to share that strategy with you in a short video. Check it out here – http://youtu.be/6J9KPuimyXk

I hope you will enjoy it.

Interesting AAPL Stock Options Strategy

In spite of the big run-up in the price of AAPL since it announced blow-out earnings that exceeded all expectations, I think the stock has more room to go up. It is still . . .

Making Adjustments to the Shoot Strategy

February 13th, 2012

Greetings!

Last week I shared the actual positions we held in what we call our Shoot Strategy portfolio (which uses AAPL as the underlying). Last week was a great one for AAPL. The stock rose 7.3%. Our portfolio gained 22.1% after commissions, or more than 3 times the amount the stock went up.

One of the potential problems of the options portfolio is that the stock goes up too fast. When that appears to be happening, as it did in Apple last week, adjustments need to be made. We will talk a little about those adjustments this week.

Terry

Making Adjustments to the Shoot Strategy

First, let’s repeat the table of the actual positions . . .

Why Owning Options Beats Owning Stock

February 6th, 2012

Two weeks ago, Apple announced blow-out earnings that pleased just about everyone who follows the stock. Since that time, AAPL has soared by 9.2%. Owners of the stock are celebrating.

Meanwhile, the actual options portfolio we carry out at Terry’s Tips increased in value by 42.5% over this same time period. Options outperformed the stock by more than 4 times.

Today I will share with you the actual option positions we hold in this portfolio, and show the potential gains (or losses) that lie ahead. This is an important report that I hope you will read carefully

Why Owning Options Beats Owning Stock

In April, 2010, we set up a $5000 portfolio to demonstrate that a well-designed options portfolio could substantially outperform the outright purchase of stock. We selected AAPL as the underlying, a company we thought had a good future.

We never imagined that future would be quite as spectacular as it has been so far. The stock has skyrocketed by 72% since then. Meanwhile, our options portfolio has gone up by 263%. Our subscribers who mirrored our portfolio from the very beginning have gained over 3.5 times as much as they would have if they had merely purchased shares of AAPL.

We withdrew $3000 of the original $5000 so new subscribers could mirror the portfolio with a smaller investment. The original investment, now $2000, as grown to its present value of $12,141 in 21 months. Not bad by any standards, if we do say so ourselves.

How did we do it? Quite simply, we bought call options with a few months of remaining life and sold call options with only one month of remaining life against these positions. The shorter-term calls we sold to someone else decay at a faster rate than the longer-term calls that we own. This gives us a major advantage over anyone who has just gone out and bought shares of stock.

In options terminology, we created a portfolio that maximized net delta (the equivalent number of shares of stock we own) as long as there was positive theta (which means that the portfolio would make a small gain every day that the stock remained absolutely flat).

Here are the actual . . .

Andy’s Market Report – 1/31/12

January 31st, 2012

January’s rally was admirable. Its perseverance frustrated bears. The infrequent single day declines maxed out at -0.6%.

And the last nine days of the month were more than mind-numbing for most traders as the market traded in a very tight range.

There’s no doubt the bears are ready. Almost every technical and sentiment measure I follow has pushed into a . . .

Andy’s Market Report – January 30, 2012

January 31st, 2012

Have you seen the VIX lately?

18.53? Seriously?

Well, some of you asked for it and now look what you get in return – low options premium. Sellers of options need volatility, we thrive on volatility. Volatility is our friend.

But volatility is at a six-month low, which raises hopes that a calmer market will bring in more investors. There is certainly no doubt that most risk is tied up in bonds right now, but once investors are willing to take on more risk they will move back into the stock market. The question is when.

“Lower volatility is like a . . .

Update on Last Week’s Apple Trade

January 31st, 2012

Last week I recommended an options spread on AAPL prior to its earnings announcement on Tuesday. The spread would have made money if the stock fell, remained the same, or rose moderately. The only scenario where a loss would take place was if it shot considerably higher.

I believed that since the stock had already gone up $50 over the last month, much of the expected earnings blow-out had already been priced into the stock.

I was wrong, and the stock soared about $40 on the announcement. Today I would like to discuss what we did about it.

Andy’s Market Report

January 24th, 2012

Simply stated, the rally continues.


Nothing, and I mean absolutely nothing can hold this market down.

Numerous downgrades from Fitch, Moody’s the S&P and more importantly the World Bank, more European woes, news of inevitable Greek default, financial sector struggles, among bearish technical and seasonal readings hasn’t helped the bears at all during 2012.

As a result, the market has managed to advance on ten of the past twelve trading days leading to gains of 4.6% in the S&P 500, 4.1% in the Dow and a staggering 7.0% in the Nasdaq – in three weeks, yes, three weeks.

If you tack on the gains since December 19th, when this rally started, the gains are . . .

Options Tip Of The Week

January 23rd, 2012

This week I will share an options play that we are taking in advance of tomorrow’s earnings announcement by AAPL. If you think it is a good idea, you will have to place the trade before the market closes Tuesday, January 24, 2012.

Options Tip Of The Week

Expectations are sky high for Apple. The company reports earnings for the 4th quarter tomorrow, and Christmas sales are rumored to be through the roof. People have reported long lines for a month at Apple retail stores.

Demand is so high for iPhones in China that hordes of country dwellers have been hired to take a train to a city to buy a single iPhone (payment $16 for a day’s “work”) but the stores don’t have enough products so many people were turned away. A riot broke out and the stores were eventually closed (the website stills sells their products, but you wonder why they hire buyers if consumers can buy online).

It is always a good sign for a company when the biggest obstacle to success is making enough of the products rather than selling them.

On a fundamental basis, AAPL is trading at less than 11 times forward earnings, an extremely low number for a company growing at 39% a year (although it may be more than this amount – we will know tomorrow).

So will the stock skyrocket on Wednesday after the earnings announcement? The answer is . . .

A Look at the Downsides of Option Investing

January 9th, 2012

Most of the time, we talk about the wonderful aspects of investing in options. I am proud that the new strategy we set up five weeks ago has now had five consecutive weeks of gains (averaging over 5% a week), but today I would like to discuss some of the negatives in trading options. Unfortunately, there are a few.

A Look at the Downsides of Option Investing

1. Taxes. Except in very rare circumstances, all gains are taxed as . . .

Trading Rules for New 5%-a-Week Strategy

December 27th, 2011

Today I will list the trading rules for the new strategy that has made an average 6.4% gain every week since we set it up in early December.

More importantly, we are repeating of our offer of becoming an Insider for the lowest price we have ever offered.

Trading Rules for New 5%-a-Week Strategy

Our goal is to make 5% a week. Admittedly, that sounds a little extreme. But we did it for . . .

Making 36%

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Success Stories

I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins