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Archive for December, 2011

Trading Rules for New 5%-a-Week Strategy

Tuesday, 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 the first 3 weeks we tried it in a real account.  In fact, we gained an average of 6.4% after commissions.  

We call it the STUDD StrategySTUDD stands for Short Term Under-Intrinsic Double Diagonal.  How’s that for a weird acronym?

Here are the Trading Rules:

1)    Purchase an equal number of deep in-the-money (5 – 8 strikes from the stock price) puts and calls for an expiration month which has 3 to 7 weeks of remaining life.

2)    At the same time, sell the same number of at-the-money or just out-of-the-money Weekly puts and calls.

3)    Make the above purchases and sales at a net price which is less than the intrinsic value of the long options. (Intrinsic value is the difference between the strike prices.  For example, we purchased IWM January-12 70 calls and 80 puts, and the intrinsic value of these two options will be at least $10 no matter where the stock ends up.  We paid a net $9.46 for the initial spreads, and as long as the short options are out of the money, the long options will eventually be worth at least their intrinsic value of $10).  Any out-of-the-money premium collected in subsequent weeks would be pure profit.

4)    During the week, if either of the short Weekly options become over $1 in the money, buy them back and replace them with another short option which is 2 strikes higher or lower (depending on which way the stock has moved).  Move both short Weekly options by 2 strikes in the same direction, one at a debit (buying a vertical spread) and one at a credit (selling a vertical spread).  The net amount that the two trades cost will reduce the potential maximum gain for the week.

5)    On the Friday when the Weeklys expire, buy back the short Weeklys and sell next-week Weeklys at the just out-of-the-money strike price for both puts and calls.

6)    On the Friday when the original monthly options are due to expire, close out all the positions and start the process over with new positions.
There will invariably be some variations to these trading rules.  For example, instead of selling just out-of-the-money Weekly options, we might sell some which are a dollar more than the just out-of-the-money strike.  We also might close out the original monthly options a week before the final Friday if they can be sold for appreciably more than the intrinsic price (the more the stock has moved during the month, the higher above the intrinsic value the options will be able to be sold for).

This all may seem a little confusing right now, but if you decide to make a serious investment in your financial future, it will all become clear as you can watch how an actual portfolio (or two) unfolds using these trading rules for the next two months as a Terry’s Tips Insider.

As our New Year’s gift to you, we are offering our service at the lowest price in the history of our company.  We have never before offered a discount of this magnitude.  If you ever considered becoming a Terry’s Tips Insider, this would be the absolutely best time to do it.  

So what’s the investment?  I’m suggesting that you spend a small amount to get a copy of my 70-page (electronic) White Paper, and devote some serious early-2012 hours studying the material.  

And now for the Special Offer – If you make this investment in yourself by midnight, December 31, 2011, this is what happens:

For a one-time fee of only $39.95, you receive the White Paper (which normally costs $79.95 by itself), which explains my two favorite option strategies in detail, 20 “Lazy Way” companies with a minimum 100% gain in 2 years, mathematically guaranteed, if the stock stays flat or goes up, plus the following services :

1) Two free months of the Terry’s Tips Stock Options Tutorial Program, (a $49.90 value).  This consists of 14 individual electronic tutorials delivered one each day for two weeks, and weekly Saturday Reports which provide timely Market Reports, discussion of option strategies, updates and commentaries on 8 different actual option portfolios, and much more. 

2) Emailed Trade Alerts. I will email you with any trades I make at the end of each trading day, so you can mirror them if you wish (or with our Premium Service, you will receive real-time Trade Alerts as they are made for even faster order placement or Auto-Trading with a broker).  These Trade Alerts cover all 8 portfolios we conduct.

3) If you choose to continue after two free months of the Options Tutorial Program, do nothing, and you’ll be billed at our discounted rate of $19.95 per month (rather than the regular $24.95 rate).

4) Access to the Insider’s Section of Terry’s Tips, where you will find many valuable articles about option trading, and several months of recent Saturday Reports and Trade Alerts.

5) A FREE special report  “How We Made 100% on Apple in 2010-11 While AAPL Rose Only 25%“.

With this one-time offer, you will receive all of these benefits for only $39.95, less than the price of the White Paper alone. I have never made an offer anything like this in the eleven years I have published Terry’s Tips.  But you must order by midnight on December 31, 2011. Click here and enter Special Code 2012 (or 2012P for Premium Service – $79.95) in the box to the right.

Investing in yourself is the most responsible New Year’s Resolution you could make for 2012.  I feel confident that this offer could be the best investment you ever make in yourself.

Happy New Year!  I hope 2012 is your most prosperous ever.  I look forward to helping you get 2012 started right by sharing this valuable investment information with you. 

Terry

P.S.  If you would have any questions about this offer or Terry’s Tips, please call Seth Allen, our Senior Vice President at 800-803-4595.  Or make this investment in yourself at the lowest price ever offered in our 8 years of publication – only $39.95 for our entire package – http://www.terrystips.com/track.php?tag=2012&dest=programs-and-pricing using Special Code 2012 (or 2012P for Premium Service – $79.95).

Invest in Yourself in 2012 (at the Lowest Rate Ever)

Monday, December 26th, 2011

For the last few weeks I have been discussing a low-risk strategy that is designed to gain at least 5% each week.  The actual account where we conduct that strategy managed to reach the goal once again last week (gaining 5.5%).  So far, the portfolio is batting 1000 and averaging a 6.4% gain per week even though last week was a challenge because SPY rose almost 4% (the strategy works best when the market doesn’t move very much in either direction).

Tomorrow I will disclose the Trading Rules for this unique strategy, but today I would like to discuss something far more important – your financial future.

Invest in Yourself in 2012 (at the Lowest Rate Ever)

The presents are unwrapped.  The New Year will be upon us in few days.  Start it out right by doing something really good for yourself, and your loved ones. 

The beginning of the year is a traditional time for resolutions and goal-setting.  It is a perfect time to do some serious thinking about your financial future.

I believe that the best investment you can ever make is to invest in yourself, no matter what your financial situation might be.  Learning a stock option investment strategy is a low-cost way to do just that.

As our New Year’s gift to you, we are offering our service at the lowest price in the history of our company.  We have never before offered a discount of this magnitude.  If you ever considered becoming a Terry’s Tips Insider, this would be the absolutely best time to do it.  Read on…

Don’t you owe it to yourself to learn a system that carries a very low risk and could make 5% a week as our actual portfolio has done since we started it?

So what’s the investment?  I’m suggesting that you spend a small amount to get a copy of my 70-page (electronic) White Paper, and devote some serious early-2012 hours studying the material. 

And now for the Special Offer – If you make this investment in yourself by midnight, December 31, 2011, this is what happens:

For a one-time fee of only $39.95, you receive the White Paper (which normally costs $79.95 by itself), which explains my two favorite option strategies in detail, 20 “Lazy Way” companies with a minimum 100% gain in 2 years, mathematically guaranteed, if the stock stays flat or goes up, plus the following services :

1) Two free months of the Terry’s Tips Stock Options Tutorial Program, (a $49.90 value).  This consists of 14 individual electronic tutorials delivered one each day for two weeks, and weekly Saturday Reports which provide timely Market Reports, discussion of option strategies, updates and commentaries on 8 different actual option portfolios, and much more. 

2) Emailed Trade Alerts.  I will email you with any trades I make at the end of each trading day, so you can mirror them if you wish (or with our Premium Service, you will receive real-time Trade Alerts as they are made for even faster order placement or Auto-Trading with a broker).  These Trade Alerts cover all 8 portfolios we conduct.

3) If you choose to continue after two free months of the Options Tutorial Program, do nothing, and you’ll be billed at our discounted rate of $19.95 per month (rather than the regular $24.95 rate).

4) Access to the Insider’s Section of Terry’s Tips, where you will find many valuable articles about option trading, and several months of recent Saturday Reports and Trade Alerts.

5) A FREE special report  “How We Made 100% on Apple in 2010-11 While AAPL Rose Only 25%“.

With this one-time offer, you will receive all of these benefits for only $39.95, less than the price of the White Paper alone. I have never made an offer anything like this in the eleven years I have published Terry’s Tips.  But you must order by midnight on December 31, 2011. Click here and enter Special Code 2012 (or 2012P for Premium Service – $79.95) in the box to the right.

Investing in yourself is the most responsible New Year’s Resolution you could make for 2012.  I feel confident that this offer could be the best investment you ever make in yourself.

Happy New Year!  I hope 2012 is your most prosperous ever.  I look forward to helping you get 2012 started right by sharing this valuable investment information with you. 

Terry

P.S.  If you would have any questions about this offer or Terry’s Tips, please call Seth Allen, our Senior Vice President at 800-803-4595.  Or make this investment in yourself at the lowest price ever offered in our 8 years of publication – only $39.95 for our entire package – http://www.terrystips.com/track.php?tag=2012&dest=programs-and-pricing using Special Code 2012 (or 2012P for Premium Service – $79.95).

Update on 5% a Week “Conservative” Portfolio

Monday, December 19th, 2011

Last week was a bad one for the market.  The S&P 500 fell 3.5%.  Six of the 8 portfolios carried out at Terry’s Tips made gains last week. Once again, our subscribers where happy that they owned options rather than stock.

One of the two portoflios that lost money is not carried out with our basic strategy, but is a proxy for owning stock in AAPL (which fell over $12 last week, obviously causing a loss).

Our 10K Bear portfolio gained almost 10% for the week, and now has gone up over 70% since we started it 5 months ago (SPY has fallen 7.5% over that time period).  This portfolio continues to be a good hedge against other investments which do best when markets move higher.

Today I would like to update the report I sent out last week on a $1479 investment which we believe should make 5% a week.

Update on 5% a Week “Conservative” Portfolio:

Three weeks ago, we made the following trades in one of our portfolios as a demonstration of an option play that we believe will make at least 5% a week after paying all commissions.  At the time, SPY was trading just about $125:

Buy To Open 1 SPY Jan-12 132 put (SPY120121P132)
Sell To Open 1 SPY Dec2-11 125 put (SPY111209P125) for a debit of $6.98  (buying a diagonal)
 
Buy To Open 1 SPY Jan-12 118 call (SPY120121C118)
Sell To Open 1 SPY Dec2-11 125 call (SPY111209P125) for a debit of $7.05  (buying a diagonal)

These two spreads cost us a total of $1403 plus commissions of $5 (the commission rate for Terry’s Tips subscribers at thinkorswim).  It is an interesting option play because the deep in-the-money Jan-12 put and call together will be worth at least $1400 (their intrinsic value) when they expire on the third Friday in January (7 weeks after we made these trades).  Since we only paid $1408 for these options, as long as we don’t have to buy back any short options we might sell against them, we are guaranteed to collect at least $1400 when they expire in January.

An interesting additional feature of this portfolio is that if the stock manages to make a big move during the 7 or so weeks of the long options’ existence, the original long put and call might be able to be sold at the beginning of the final week for well more than their intrinsic value.  The closer to one of the original strike prices the stock becomes, the greater the additional time premium will be.  Of course, if the stock moves outside the original range (118 – 132), the total value would exceed the original intrinsic value of $14 (again, as long as the short options continue to be out of the money).

We will have 6 opportunities to sell Weekly puts and calls using the Jan-12 options as collateral for those sales.  Any money we collect from selling those options is pure profit (unless they end up in the money and we have to buy them back on the Friday that they expire).

Since the options we sold were both at the 125 strike price, one of them would have to be bought back on Friday, December 9th (unless SPY closed exactly at $125.00, an unlikely event). 

As we reported a week ago, the portfolio gained 6.2% after commissions in its first week, and we started out last week being short a Dec-11 SPY 127 call (which we had sold for $1.28 and a Dec-11 SPY 126 put (which we had sold for $1.99).  If we would be lucky enough for the stock to remain in the $126 – $127 range all week, the $324 we collected (after commissions) by selling these two options would be pure profit (a whopping 22% on our original investment in a single week).

The secret of success to this little strategy is in the adjustments that invariably need to be made because the stock usually doesn’t stay perfectly flat all week.  Last week was no exception.  SPY fell $4.46.  Ouch!

When SPY fell over $2, we bought back our short 126 put and sold a 123 put which also expired on Friday, December 16.  Buying this vertical spread cost us $181 after commissions, but our net cost was reduced by what we gained by selling a vertical spread on the short 127 call, replacing it with a short 124 call (this sale gained us $104 after commissions).  So we had now lost $77 of the potential maximum $324 gain for the week.

On Friday, we had to buy back the in-the-money 123 put, paying out $133, and we bought back the out-of-the-money 124 call for $1 (no commission charged at thinkorswim for this trade).  These trades reduced the potential maximum gain by $134. For the week, then, we gained $113, or 7.6% on the original investment of $1479 ($1408 plus an adjustment cost) three weeks earlier.

At the outset, we said that we expected this little investment would gain us an average of 5% a week, and we have exceeded that goal in each of the first two weeks.  Going into the third week, we have collected $127 from selling a 121 put which expires on December 23 and $142 from selling a 122 call which expires on that same day. 

If SPY ends up between $121 and $122 this Friday (and no adjustments become necessary), we could earn $269, or 18% on our original investment.  (At the end of the day last Friday, these two options were worth a total of $253, so we had already picked up a paper gain of $16).

Here is the risk profile graph for our positions, indicating the loss or gain next Friday at the various possible prices for SPY. Of course, if SPY fluctuates by $2, we would make an adjustment as we did this week, and hopefully turn a possible loss into a gain (as we did last week).

If you can follow the above trades, you have a good understanding how we carry out our portfolios at Terry’s Tips.  If this strategy can indeed make 5% a week (and there is the possibility of much more), we wonder why anyone would be buying stock or mutual funds rather than investing in an option strategy similar to this. 

Many of our subscribers are mirroring our trades in this portfolio (or having thinkorswim make the trades for them through their Auto-Trade service).  Last week they were all happy campers. 
___

Any questions?   I would love to hear from you by email (terry@terrystips.com), or if you would like to talk to our guy Seth, give him a jingle at 800-803-4595 and either ask him your question(s) or give him your thoughts.

You can see every trade made in 8 actual option portfolios conducted at Terry’s Tips and learn all about the wonderful world of options by subscribing here.   Why wait any longer to make this important investment in yourself?

I look forward to having you on board, and to prospering with you.

Terry

An Interesting “Conservative” Option Purchase That Could Make 5% a Week

Thursday, December 15th, 2011

This week I would like to describe an actual option play we made two weeks ago which you should be able to duplicate with no more than a $1600 investment.  We believe it will make at least 5% a week for the six remaining weeks of its existence.

We are pleased that every one of our portfolios made nice gains last week.  The average portfolio gained 7% after commissions in spite of fairly high mid-week volatility.  We were especially happy with our bearish 10K Bear portfolio – it gained 13% even though SPY ended up going up by 1% last week.  Our William Tell portfolio (using AAPL as the underlying) gained 8.7% while AAPL rose 1%.

An Interesting “Conservative” Option Purchase That Could Make 5% a Week:

Two weeks ago, we made the following trades in one of our portfolios as a demonstration of an option play that we believe will make at least 5% a week after paying all commissions.  At the time, SPY was trading just about $125:

Buy To Open 1 SPY Jan-12 132 put (SPY120121P132)
Sell To Open 1 SPY Dec2-11 125 put (SPY111209P125) for a debit of $6.98  (buying a diagonal)
 
Buy To Open 1 SPY Jan-12 118 call (SPY120121C118)
Sell To Open 1 SPY Dec2-11 125 call (SPY111209P125) for a debit of $7.05  (buying a diagonal)

These two spreads cost us a total of $1403 plus commissions of $5 (the commission rate for Terry’s Tips subscribers at thinkorswim).  It is an interesting option play because the deep in-the-money Jan-12 put and call together will be worth at least $1400 (their intrinsic value) when they expire on the third Friday in January (7 weeks after we made these trades).  Since we only paid $1408 for these options, as long as we don’t have to buy back any short options we might sell against them, we are guaranteed to collect at least $1400 when they expire in January.

We will have 6 opportunities to sell Weekly puts and calls using the Jan-12 options as collateral for those sales.  Any money we collect from selling those options is pure profit (unless they end up in the money and we have to buy them back on the Friday that they expire).

Since the options we sold were both at the 125 strike price, one of them would have to be bought back on Friday, December 9th (unless SPY closed exactly at $125.00, an unlikely event). 

Two days after we bought the two spreads, SPY shot up to $127 (when the stock moves $2 with this strategy, we make an adjustment because we do not want any of our short options to become more than $2 in the money).  These are the trades we placed:

Buy To Close 1 SPY Dec2-11 125 call (SPY111209C125)
Sell To Open 1 SPY Dec2-11 127 call (SPY111209C127) for a debit of $1.33  (buying a vertical)

Buy To Close 1 SPY Dec2-11 125 put (SPY111209P125)
Sell To Open 1 SPY Dec2-11 127 put (SPY111209P127) for a credit of $.67  (selling a vertical)

We paid out $133 to roll up the short call from the 125 strike to the 127 strike, and collected $67 when we rolled up the short put from the 125 to 127 strike.  After commissions, these two trades cost us a net $71.

The stock then fell back to $125 and we reversed the last put trade (but did not bother rolling down the short call to the 125 strike, electing to let it expire worthless):

Buy To Close 1 SPY Dec2-11 127 put (SPY111209P127)
Sell To Open 1 SPY Dec2-11 125 put (SPY111209P125) for a debit of $1.11  (buying a vertical)

This trade cost us $113.50 including commissions.  When we bought back the soon-to-expire short options on Friday (paying no commissions since thinkorswim does not change a commission to buy back a short option for $5 or less), we paid out another $8, making the total outlay $1600.50  ($1408 + $71 + $113.50 + $8). 

At last Friday’s prices, our long Jan-12 options were trading at a total of $1705.50, indicating that we had gained $105 for the week, or 6.2% after commissions.

At the outset, we said that we expected this little investment would gain us an average of 5% a week, so for the first week, we are right on target.

These are the orders we placed on Friday, December 9th:

Buy To Close 1 SPY Dec2-11 127 call (SPY111209C127) for $.05 (no commission)

Sell To Open 1 SPY Dec-11 127 call (SPY111217C127) for $1.28

Buy To Close 1 SPY Dec2-11 125 put (SPY111209P125) for $.03 (no commission)

Sell To Open 1 SPY Dec-11 126 put (SPY111217P126) for $1.99

For the second week, we collected a total of $324.50 by selling a Dec-11 126 put and a Dec-11 127 call which will expire next Friday, December 16th.  By the end of the day, their value had fallen to $252.25, so we had already made some of the gain we expect for the second week. If the stock ends up between these strikes (126 and 127) and we don’t have to adjust mid-week, the entire amount (about 20%) could be profit.

Here is the risk profile graph for our current positions.  It shows the expected loss or gain at the various possible prices where SPY might be on Friday (remember, if the stock moves by $2 in either direction, we will make an adjustment similar to those we made in the first week), and the curve will move in the direction that the stock moved.  Some of the potential gain will be erased when adjustments are made.

If you can follow the above trades, you have a good understanding how we carry out our portfolios at Terry’s Tips.  If this strategy can indeed make 5% a week (and there is the possibility of much more), we wonder why anyone would be buying stock or mutual funds rather than investing in an option strategy similar to this. 

Many of our subscribers are mirroring our trades in this portfolio (or having thinkorswim make the trades for them through their Auto-Trade service).  Last week they were all happy campers.

A Useful Way to Think About Delta

Monday, December 5th, 2011

This week we will ignore the looming European debt crisis for a minute and talk a little about one of the “Greeks” – a measure designed to predict how option prices will change when underlying stock prices change or time elapses. It is important to have a basic understanding of some of these measures before embarking on trading options.

I hope you enjoy this short discussion.

A Useful Way to Think About Delta

The first “Greek” that most people learn about when they get involved in options is Delta.  This important measure tells us how much the price of the option will change if the underlying stock or ETF changes by $1.00. 

If you own a call option that carries a delta of 50, that means that if the stock goes up by $1.00, your option will increase in value by $.50 (if the stock falls by $1.00, your option will fall by a little less than $.50). 
The useful way to think about delta is to consider its value to be the probability of that option finishing up (on expiration day) in the money.  If you own a call option at a strike price of 60 and the underlying stock is selling at $60, you have an at-the-money option, and the delta will likely be about 50.  In other words, the market is saying that your option has a 50-50 chance of expiring in the money (i.e., the stock is above $60 so your option would have some intrinsic value).

If your option were at the 55 strike, it would have a much higher delta value because the likelihood of its finishing up in the money (i.e., higher than $55) would be much higher.  The 55 call might have a delta of 80 or 90 (or if the option is about to expire, it will approach 100).  With the stock at $60 and the strike at 55, the stock could fall by $4.99 or go up by any amount and it would end up being in the money, so the delta value would be quite high.

On the other hand, if your call option were at the 65 strike while the stock was selling at $60, it would carry a much lower delta (maybe 10 if expiration is near, or 30 if there are a few months to go until expiration) because there would be a much lower likelihood of the stock going up $5 so that your option would expire in the money.

Of course, the amount of remaining life also has an effect on the delta value of an option.  For in-the-money call options, the closer to expiration you are, the higher the delta value.  For out-of-the-money options, delta values are higher for further-out expirations.  As in many things concerning options, even the most simple measure, delta, is a little confusing.  Fortunately, most brokers (especially thinkorswim) show you the net delta value of your long and short options at all times (or the deltas of any options you are thinking of buying or selling).
In one Terry’s Tips portfolio, we have sold December call options for AAPL which expire on December 16th.  With the stock currently trading about $395, the Dec-11 395 call carries a delta of 50 (meaning the market is betting that there is a 50-50 chance of AAPL trading above $395 in two weeks, at expiration).  We are also short a Dec-11 405 call which carries a delta of 30.  The market figures that there is about a 30% chance that AAPL will be above $405 in two weeks.  And the Dec-11 415 call has a delta of only 14, so the expectation is that 14% of the time, the stock might rally by $20 over those two weeks.

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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.

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