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Archive for October, 2018

Can PayPal (PYPL) Continue It’s Earnings-Driven Momentum?

Sunday, October 28th, 2018

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.

Last week was an awful one for the market.  SPY fell 4% after whip-sawing both up and down all week.  Most option portfolios probably suffered as well.  We were delighted that our newest portfolio which trades options on MSFT notched a gain of 20.4% for this otherwise bad week for the market.  Chalk up another victory for well-executed option strategies.

Terry

Can PayPal (PYPL) Continue It’s Earnings-Driven Momentum?

PayPal received a recent boost from it’s earnings report and these Seeking Alpha articles suggest it can continue the upside momentum – PayPal: It’s A Buy and It’s Not Too Late To Buy PayPal.

Payal appears to be supported near the $83 price point which was where the stock gapped up to following their earnings report earlier this month.  The 20 and 50-day moving averages are converging in this area as well to offer further technical support.  In the event of a dip lower, further support near the psychological $80 handle is likely to trigger strong buying as technical traders often look to position following a gap close.

PYPL Chart October 2018

PYPL Chart October 2018

*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 five weeks, or at least not decline very much.

Buy To Open PYPL 30NOV18 80 Puts (PYPL181130P80)
Sell To Open PYPL 30NOV18 83 Puts (PYPL181130P83) for a credit of $1.06 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when PYPL was trading near $83.  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 $103.50 and your broker would charge a $300 maintenance fee, making your investment $196.50 ($300 – $103.50).  If PYPL closes at any price above $83 on November 30, both options would expire worthless, and your return on the spread would be 53% (605% annualized).

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

IBD Underlying Updates October 25, 2018

IBD Underlying Updates October 25, 2018

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

Will Dollar General Power to Record Highs?

Monday, October 22nd, 2018

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

Will Dollar General Power to Record Highs?

DG is one of the few stocks on the IBD Top 50 list that is on the verge of breaking to record highs.  These two articles may help to explain what the driving force behind the momentum is Can Continued Growth Fuel Dollar General Corporation To Reach New Levels? and Sturdy Comps, Better Pricing to Propel Dollar General’s Sales

Technical strength in DG is seen best via correlation when looking at growth stocks and US equity indices.  As well, the stock appears to have recently broken above a bullish flag pattern, climbing above the 50-day moving average in the process.  DG ended the past week holding support near 109 and shows further support from a strong confluence found just above 107.

DG Chart October 2018

DG Chart October 2018

*source Tradingview.com

If you agree there’s further upside ahead for DG, consider this trade which is a bet that the stock will continue to advance over the next five weeks, at least a little bit.

Buy To Open DG 23NOV18 105 Puts (DG181123P105)
Sell To Open DG 23NOV18 110 Puts (DG181123P110) for a credit of $1.75 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when DG was trading near $110.  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 $172.50 and your broker would charge a $500 maintenance fee, making your investment $327.50 ($500 – $172.50).  If DG closes at any price above $110 on November 23, both options would expire worthless, and your return on the spread would be 53% (605% annualized).

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

IBD Underlying Updates October 18, 2018

IBD Underlying Updates October 18, 2018

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

Consider Ulta Beauty (ULTA) Following the Technical Break

Sunday, October 14th, 2018

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

Consider Ulta Beauty (ULTA) Following the Technical Break

Several analysts are optimistic regarding the outlook for Ulta Beauty stock, here are two of them – Ulta Beauty Up 19% in 3 Months on Strategic Efforts and David Rolfe Comments on Ulta Beauty.

ULTA made a notable technical break in early September by clearing above horizontal resistance at $260 that had held it lower throughout the summer.  The stock has corrected lower since hitting highs around 290 which may offer an attractive entry point.  The recent decline has not accompanied much downside momentum, which is especially significant when considering overal market conditions, suggesting a correction is taking place rather than a turn in the near-term trend.

ULTA Chart October 2018

ULTA Chart October 2018

*source Tradingview.com

If you agree there’s further upside ahead for ULTA, 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 ULTA 16NOV18 270 Puts (ULTA181116P270)
Sell To Open ULTA 16NOV18 275 Puts (ULTA181116P275) for a credit of $2.18 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when ULTA was trading near $276.  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 $215.50 and your broker would charge a $500 maintenance fee, making your investment $284.50 ($500 – $215.50).  If ULTA closes at any price above $275 on November 16, both options would expire worthless, and your return on the spread would be 76% (867% annualized).

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

IBD Underlying Updates October 11, 2018

IBD Underlying Updates October 11, 2018

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

Should You Buy The Dip in Dave & Buster’s (PLAY)?

Sunday, October 7th, 2018

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

Should You Buy The Dip in Dave & Buster’s (PLAY)?

Several analysts see Dave & Buster’s stock price continuing higher, here are two of them – Dave & Buster’s Entertainment Upgraded by Zacks Investment Research to “Buy” and Dave & Buster’s Entertainment Price Target Raised to $70.00.

From a technical perspective, PLAY is seen bouncing from a confluence of support derived from the 20-day moving average and a horizontal level at $62.50.  Further support is seen slightly below the confluence area from a rising trendline that originates from a low posted in late July.

PLAY Chart October 2018

PLAY Chart October 2018

*source Tradingview.com

If you agree there’s further upside ahead for PLAY, 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 PLAY 9NOV18 60 Puts (PLAY18119P60)
Sell To Open PLAY 9NOV18 63 Puts (PLAY18119P63) for a credit of $1.03 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when PLAY was trading near $64.  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 $100.50 and your broker would charge a $300 maintenance fee, making your investment $199.50 ($300 – $100.50).  If PLAY closes at any price above $63 on November 9, both options would expire worthless, and your return on the spread would be 50% (570% annualized).

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

IBD Underlying Updates October 4, 2018

IBD Underlying Updates October 4, 2018

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

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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.

~ John Collins