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Archive for the ‘Credit Spreads’ Category

Wedbush Raises Price Target for Microsoft (MSFT) to $270

Monday, February 1st, 2021

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.

Wedbush recently raised their MSFT price target to $270 from $260 and said they see potential for it to reach as high as $300. The following two article discuss the price upgrade and reasons why MSFT appears poised to grow – Microsoft will leap another 20% as cloud-computing strength drives strong earnings, Wedbush says and Microsoft: Still Not Fully Priced, Here’s Why.

Technicals

From a technical perspective, MSFT recently posted a bullish breakout above a horizontal resistance level at $225. This same level had capped rallies three times in the fourth quarter of 2020 and is seen as strong support in the event the stock pulls back further from here. There is also support at $231.15 which marks the late August high.

MSFT Chart February 2021 - Undervalued

MSFT Chart February 2021

If you agree there’s further upside ahead for MSFT, consider this trade which relies on the stock remaining above $230 through the expiration in five weeks.

Buy To Open MSFT 05MAR21 225 Puts (MSFT210305P225)
Sell To Open MSFT 05MAR21 230 Puts (MSFT210305P230) for a credit of $1.73 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when MSFT was trading near $232.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $171.70. This reduces your buying power by $500 and makes your investment $328.30 ($500 – $171.70).  If MSFT closes at any price above $230 on March 5, both options will expire worthless, and your return on the spread would be 52% ($171.70 / $328.30), or 593% annualized.

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

IBD Underlying Updates January 30, 2021

IBD Underlying Updates January 30, 2021

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

Thermo Fisher (TMO) Shows Renewed Upward Momentum

Monday, January 11th, 2021

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.

TMO shows signs it has reverted to an uptrend and with a strong fundamental outlook, the stock could see a continuation higher. The following two articles provide more details on the fundamentals of the company  –  Why the Earnings Surprise Streak Could Continue for Thermo Fisher and Is Thermo Fisher Scientific Inc.’s Latest Stock Performance Being Led By Its Strong Fundamentals?

Technicals

The appeal to TMO from the technical side of things is the resurgence of upward momentum since the start of the new year, TMO has broken higher from a flag pattern that had contained it for most of December and it has rallied above a horizontal level near $482. A small dip can’t be ruled out over the short term but the price action seems to suggest that TMO is ready to resume the prior uptrend with an aim for a new all-time high.

TMO Chart January 2021 - Renewed uptrend

TMO Chart January 2021

If you agree there’s further upside ahead for TMO, consider this trade which relies on the stock remaining above $510 through the expiration in five weeks.

Buy To Open TMO 19FEB21 500 Puts (TMO210219P500)
Sell To Open TMO 19FEB21 510 Puts (TMO210219P510) for a credit of $3.78 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when TMO was trading near $512.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $376.70. This reduces your buying power by $1000 and makes your investment $623.30 ($1000 – $376.70).  If TMO closes at any price above $510 on February 19, both options will expire worthless, and your return on the spread would be 60% ($376.70 / $623.30), or 684% annualized.

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

IBD Underlying Updates January 9, 2021

IBD Underlying Updates January 9, 2021

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

Pacira BioSciences (PCRX) Dips After Breaking to Multi-Year Highs

Monday, December 7th, 2020

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.

PCRX showed strong upward momentum last month and briefly traded at levels not seen in nearly five years. Several analysts think the stock can continue to gain, the following two articles provide details – IBD 50 Stocks To Watch: This Pharma Stock On 115% Run Eyes Buy Point and $129.57 Million in Sales Expected for Pacira BioSciences, Inc. (NASDAQ:PCRX) This Quarter.

Technicals

The upward move from November has resulted in a bullish candlestick pattern on a monthly chart that suggests dips will be bought over the near-term. The stock has pulled back from its multi-year highs but is seen approaching a strong confluence of support. This comes from an intersection of the 50 and 100-Day moving averages, currently around $58.50.

PCRX Chart December 2020 - Buy the dip

PCRX Chart December 2020

If you agree there’s further upside ahead for PCRX, consider this trade which relies on the stock remaining above the $60 level through the expiration in six weeks.

Buy To Open PCRX 15JAN20 57.5 Puts (PCRX200115P57.5)
Sell To Open PCRX 15JAN20 60 Puts (PCRX200115P60) for a credit of $1.13 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when PCRX was trading near $61.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $111.70. This reduces your buying power by $250 and makes your investment $138.30 ($250 – $111.70).  If PCRX closes at any price above $60 on January 15, both options will expire worthless, and your return on the spread would be 81% ($111.70 / $138.30), or 758% annualized.

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

IBD Underlying Updates December 5, 2020

IBD Underlying Updates December 5, 2020

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

Investors Flock to Facebook (FB) Post-Election

Monday, November 9th, 2020

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.

Facebook rose sharply higher in the past week for a gain of 11.5%. The following two articles discuss the rationale behind the move and its implications – 3 Stocks That Are Big Winners After The U.S. Election and Best Mutual Funds Buy Up FANG Stocks Amazon, Alphabet, Facebook.

Technicals

The price action points to the same narrative as suggested by the articles mentioned above. There was a large move lower ahead of the election, likely attributed to investors covering their position ahead of the election. But then the rally in the past week catapulted FB to a new 2-month high, signaling a clear shift in sentiment from the earlier uncertainty. Further, FB’s outperformance compared to the broader markets during this time shows that it remains a favorite among investors. Near-term support is seen at $284 as the price point acted as resistance last month. The strong show of buying as of late suggests that near-term dips will be shallow, but if FB dips below $284, further support is seen at the 50-Day moving average. This moving average falls near a rising trendline that originates from a low printed in late June.

FB Chart November 2020 - Post election spike FANG

FB Chart November 2020

If you agree there’s further upside ahead for FB, consider this trade which relies on the stock remaining above the $292.5 level through the expiration in five weeks.

Buy To Open FB 11DEC20 290 Puts (FB201211P290)
Sell To Open FB 11DEC20 292.5 Puts (FB201211P292.5) for a credit of $1.08 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when FB was trading near $293.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $106.70. This reduces your buying power by $250 and makes your investment $143.30 ($250 – $106.70).  If FB closes at any price above $292.5 on December 11, both options will expire worthless, and your return on the spread would be 74% ($106.70 / $143.30), or 844% annualized.

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

IBD Underlying Updates November 7, 2020

IBD Underlying Updates November 7, 2020

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

Franco Nevada (FNV) – Is it Time to Start Looking at Gold Stocks Again?

Monday, November 2nd, 2020

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.

Back in August, gold-related stocks were in the headlines as many of them were surging with spot gold prices rallying to an all-time high. Often when a certain sector is getting a lot of attention, it’s worthwhile waiting for a pullback which is why it may be worthwhile revisiting FNV which has retreated 16% from its August high. The following article outlines why FNV’s upcoming earnings report could drive its stock price higher – Franco-Nevada (FNV) Earnings Expected to Grow: What to Know Ahead of Next Week’s Release. Also take a look at this article which discusses FNV’s advantage over its competitors as a result of its unique business model – Franco Nevada Corp (FNV) Has Risen 45% in Last One Year, Outperforms Market.

Technicals

FNV tested its 200-day moving average and the candlestick pattern that has materialized since then signals that a bullish reversal could take place. Looking at the broader picture, while FNV has declined notably from its August high there hasn’t been a lot of momentum in the downward move, especially over the past two months. A triangle pattern has emerged and a break of the upper line of the pattern, roughly around $140, would offer confirmation of a bullish breakout.

FNV Chart November 2020 - Gold Stocks

FNV Chart November 2020

If you agree there’s further upside ahead for FNV, consider this trade which relies on the stock remaining above the $135 level through the expiration in seven weeks.

Buy To Open FNV 18DEC20 130 Puts (FNV201218P130)
Sell To Open FNV 18DEC20 135 Puts (FNV201218P135) for a credit of $2.08 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when FNV was trading near $136.50.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $206.70. This reduces your buying power by $500 and makes your investment $293.30 ($500 – $206.70).  If FNV closes at any price above $135 on December 18, both options will expire worthless, and your return on the spread would be 70% ($206.70 / $293.30), or 544% annualized.

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

IBD Underlying Updates October 31, 2020

IBD Underlying Updates October 31, 2020

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

Regeneron Pharmaceuticals (REGN) Retreats to Notable Technical Support

Monday, October 26th, 2020

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.

REGN has been in the spotlight ever since President Trump received its antibody treatment earlier this month, check out what the following two articles have to say about the company  – 3 COVID-19 Antibody Stocks That Are Leading the Race and Is Regeneron a Buy Before Nov. 3?

Technicals

Horizontal support at $562 is quite important for REGN as it acted as resistance back in 2015 to trigger a major reversal. The level has halted the decline that started over the summer and there are some signs that the upward cycle could continue once again. In addition to the horizontal level, there is a rising trendline in play that originates from the low in early September and the 200-Day moving average is rapidly rising to converge towards the $562 price point.

REGN Chart October 2020 - Top 3 Covid-19 Antibody Stock

REGN Chart October 2020

If you agree there’s further upside ahead for REGN, consider this trade which relies on the stock remaining above the $577.5 level through the expiration in five weeks.

Buy To Open REGN 27NOV20 577.5 Puts (REGN201127P577.5)
Sell To Open REGN 27NOV20 580 Puts (REGN201127P580) for a credit of $1.03 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when REGN was trading near $580.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $101.70. This reduces your buying power by $250 and makes your investment $148.30 ($250 – $101.70).  If REGN closes at any price above $580 on November 27, both options will expire worthless, and your return on the spread would be 69% ($101.70 / $148.30), or 718% annualized.

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

IBD Underlying Updates October 24, 2020

IBD Underlying Updates October 24, 2020

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

Can ADBE (ABDE) Hold Above the $500 Price Point?

Monday, October 19th, 2020

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.

ADBE has doubled from its March low and the following two articles lay out reasons why the stock may continue to gain. One of them even makes a case that the stock is undervalued at current levels, despite to impressive rally as of late – Adobe’s Stock To Continue Growing? and Adobe (ADBE) Up 6.4% Since Last Earnings Report: Can It Continue?

Technicals

After correcting lower last month, ADBE is starting to once again show signs of upward momentum. The stock has posted a series of higher highs and higher lows over the last four weeks as it oscillates higher in a rising trend channel. Buyers have defended the lower line of the channel as well as dips towards the 20-Day moving average. Further, a break above the $500 level earlier this month is a sign of strength. Strong near-term support is seen in the $492-$500 area.

ADBE Chart October 2020 above $500

ADBE Chart October 2020

If you agree there’s further upside ahead for ADBE, consider this trade which relies on the stock remaining above the $500 level through the expiration in five weeks.

Buy To Open ADBE 20NOV20 495 Puts (ADBE201120P495)
Sell To Open ADBE 20NOV20 500 Puts (ADBE201120P500) for a credit of $2.08 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when ADBE was trading near $503.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $206.70. This reduces your buying power by $500 and makes your investment $293.30 ($500 – $206.70).  If ADBE closes at any price above $500 on November 20, both options will expire worthless, and your return on the spread would be 70% ($206.70 / $293.30), or 798% annualized.

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

IBD Underlying Updates October 17, 2020

IBD Underlying Updates October 17, 2020

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

Lowe’s (LOW) Boosted by Rise in Home Improvement Spending

Monday, October 12th, 2020

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.

LOW has posted stellar gains in the year thus far. The following two articles discuss what drove the surge since late March as well as reasons why the momentum could continue – Lowe’s Stock Can Keep Rallying Because People Will Be Spending More Time at Home for Longer and 3 Reasons Why Lowe’s (LOW) Is a Great Growth Stock.

Technicals

From a technical standpoint, LOW has broken higher from an ascending triangle which is a bullish continuation pattern. Support for near-term dips falls at $170.50 which marks the top of the triangle. LOW is up 45% year to date and is one of only a few stocks on the IBD Top 50 list that has broken to a record high in October.

LOW Chart October 2020 bullish continuation pattern

LOW Chart October 2020

If you agree there’s further upside ahead for LOW, consider this trade which relies on the stock remaining above the $172.50 level through the expiration in five weeks.

Buy To Open LOW 13NOV20 170 Puts (LOW201113P170)
Sell To Open LOW 13NOV20 172.5 Puts (LOW201113P172.5) for a credit of $1.13 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when LOW was trading near $173.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $111.70. This reduces your buying power by $250 and makes your investment $138.30 ($250 – $111.70).  If LOW closes at any price above $172.50 on November 13, both options will expire worthless, and your return on the spread would be 81% ($111.70 / $138.30), or 924% annualized.

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

IBD Underlying Updates October 10, 2020

IBD Underlying Updates October 10, 2020

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

Green Lights are Flashing for Merck & Co (MRK)

Monday, December 16th, 2019

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.

Merck has been in the spotlight because of a recent acquisition and as several biotech’s have produced outsized gains as of late. The following two articles discuss the acquisition and how MRK is a better option compared to one of its peers – Merck: Adding To The Pipeline and Better Buy: Eli Lilly vs. Merck.

Technicals

The recent technical development in MRK is a significant one. The stock has broken above a horizontal resistance level at $87 that had held it lower on three notable attempts since the summer. Such a consolidation, followed by a break,, is often a precursor to a much larger move to come. With the stock still trading relatively close to its breakout point there is good value as technical traders usually look to defend breakout points if they were to be retested.

MRK Chart December 2019 broken resistence level

MRK Chart December 2019

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

Buy To Open MRK 17JAN20 87.5 Puts (MRK200117P87.5)
Sell To Open MRK 17JAN20 90 Puts (MRK200117P90) for a credit of $0.92 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when MRK was trading near $89.  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 $1.30 per spread.  Each contract would then yield $90.70 and your broker would charge a $250 maintenance fee, making your investment $159.30 ($250 – $90.70).  If MRK closes at any price above $90 on January 17, both options would expire worthless, and your return on the spread would be 57% (650% annualized).

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

IBD Underlying Updates December 14, 2019 via Terry's Tips

IBD Underlying Updates December 14, 2019

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

Jazz Pharmaceuticals (JAZZ) – A Pharma Stock on a Tear

Monday, December 9th, 2019

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.

Recent media coverage suggests Jazz Pharmaceuticals is a stock that investors certainly want to own. Check out what these two articles have to say about it – Hedge Funds Got Back Into Jazz Pharmaceuticals plc and  Two stocks I’d tuck away forever: Jazz Pharmaceuticals plc (JAZZ), HollyFrontier Corporation (HFC).

Technicals

JAZZ is showing a textbook technical breakout. The stock traded between roughly $115 and $145 for most of the year before finally breaking higher in November. The $145 price point offered major resistance in April and July and is now seen as support. In fact, a dip toward the level in the past week was promptly bought up, offering some confirmation that buyers do view the level as support. Further, the upward momentum from the October low is unusually strong which also confirms the outlook of a technical breakout.

JAZZ Pharmaceuticals Chart December 2019

JAZZ Chart December 2019

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

Buy To Open JAZZ 17JAN20 145 Puts (JAZZ200117P145)
Sell To Open JAZZ 17JAN20 150 Puts (JAZZ200117P150) for a credit of $2.18 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when JAZZ was trading near $149.  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 $1.30 per spread.  Each contract would then yield $216.70 and your broker would charge a $500 maintenance fee, making your investment $283.30 ($500 – $216.70).  If JAZZ closes at any price above $150 on January 17, both options would expire worthless, and your return on the spread would be 76% (711% annualized).

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

IBD Underlying Updates December 7, 2019

IBD Underlying Updates December 7, 2019

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.

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