Archive for the ‘Last Minute Strategy’ Category

If the market knocks you down, try laughing instead of crying –

Monday, October 17th, 2011

A final note on the SPY calendar spread I placed two weeks ago. With the stock running up to over $122, it got quite far from the 115 strike I had selected. As you may recall, I sold over half my positions and recovered all of my original investment and was waiting to see how much extra I would earn from selling the balance last Friday. I picked up only $.40 ($200 on my original investment of $1800, so it wasn’t entirely a bad day).

This week I would like to share some humorous market definitions.

If the market knocks you down, try laughing instead of crying -

New Market Definitions:
CEO –Chief Embezzlement Officer.

CFO– Corporate Fraud Officer.

BULL MARKET — A random market movement causing an investor to mistake himself for a financial genius.

BEAR MARKET — A 6 to 18 month period when the kids get no allowance, the wife gets no jewellery, and the husband gets no sex.

VALUE INVESTING — The art of buying low and selling lower.

P/E RATIO — The percentage of investors wetting their pants as the market keeps crashing.

STANDARD & POOR — Your life in a nutshell.

STOCK ANALYST — Idiot who just downgraded your stock.

STOCK SPLIT — When your ex-wife and her lawyer split your assets equally between themselves.

FINANCIAL PLANNER — A guy whose phone has been disconnected.

MARKET CORRECTION — The day after you buy stocks.

OUT OF THE MONEY – When your checking account’s overdraft hits bottom.

CASH FLOW– The movement your money makes as it disappears down the toilet.

YAHOO — What you yell after selling it to some poor sucker for $240 per share.

WINDOWS — What you jump out of when you’re the sucker who bought Yahoo @ $240 per share.

INSTITUTIONAL INVESTOR — Past year investor who’s now locked up in a nuthouse.

PROFIT — An archaic word no longer in use.

Tags: Calendar Spreads, Calls, Credit Spreads, ETF, Profit, Puts, Stocks vs. Stock Options, Terry's Tips, thinkorswim, Weekly Options
Posted in Last Minute Strategy, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »

Follow-Up on Low Cost SPY Calendar Spread

Monday, October 10th, 2011

Last week I told you about a simple calendar spread that might double your money in a week or two. Today I would like to follow up on that idea, and tell you exactly how it worked out in my account.

Even though the iPhone 5 was not introduced as we had expected last Tuesday, we are holding the special Terry’s Tips discount offer open until October 11 – see details below.

Follow-Up on Low Cost SPY Calendar Spread

On Monday, October 3, just after I sent out the Idea of the Week to you, I bought the exact spread that I spelled out in that report:

BTO (buy to open) 1 SPY Oct-11 115 call (SPY111022C115)
STO (sell to open) 1 SPY Oct1-11 115 call (SPY111007C115) for $1.80 (buying a calendar spread)

I bought 11 of these spreads, paying only $163 per spread ($165.50 including commissions at thinkorswim). My total investment was $1820.50. As I said in last week’s report, I expected that the spread would cost less on Monday than it did on Friday, and that was the case.

I chose the 115 strike because that was about half-way between the $112 and $120 that SPY had been fluctuating between for the past several weeks. It started out the week on the downside, falling below $108 at one point on Tuesday. I was a little concerned because when you buy a calendar spread, the maximum gain comes when the stock closes at exactly the strike price you select on the day that the short options are due to expire.

On Friday morning, October 7th, the day that the Oct1-11 116 calls were due to expire, SPY had shot up to over $116. I made two trades in the morning. I sold 6 of the original calendar spreads, collecting $2.19 ($219 less commissions of $2.50, or $216.50 per spread, or $1299.00 total).

If I had sold all 11 spreads at this price, I would have collected $2318.50 for a net profit after commissions of $561.00, or 31% on my investment for one week.

In the second trade, I rolled over the Oct-1 11 116 calls to the next week, buying back the calls expiring that day and selling the Oct2-11 116 calls. I collected $1.30 per spread ($130 less commissions of $2.50, or $127.50 x 5 spreads, or $637.50 total).

I had collected a total of $1936.55 after paying all commissions. This was greater than my total investment of $1820.50 by $116, and I am guaranteed a much greater profit a week from now when I close out the remaining 5 calendar spreads I now own. I could collect as much as $200 per spread if the stock manages to close very close to $115 on Friday.

While I am delighted with these results so far, I could have done much better if I had waited until near the end of the day on Friday. At that time, I could have rolled over the Oct1-11 calls to Oct2-11 calls and collected my entire $1.63 investment back rather than the $1.30 I collected early in the day. (I was afraid that SPY was going up fast and I would gain less if it moved further away from $115 – instead, it fell back closer to the 115 strike at the end of the day.)

Several subscribers have written in to say they tried this spread in their own accounts, many of them picking different strike prices. Happily, some of them who made money on the trades have decided to use $59.95 of their winnings to subscribe to Terry’s Tips where they might learn how to make some really big returns in future months and years.

Here is the special Terry’s Tips offer:

iPhone 5 Introduction Offer: Apple was expected to introduce IPhone 5 on October 4. For the first time, Sprint will be able to sell an IPhone. It could be a big deal for Apple, and all of us who are betting on their stock.
On April 29, 2010, Terry’s Tips set up an actual portfolio to show how an options portfolio could outperform a stock portfolio using the same stock. We chose Apple (AAPL) as a stock that we thought would go up. On the day we set up the portfolio, AAPL was trading at $277.

In the next nine months, AAPL rose 25% and our $5000 starting portfolio value had soared to $10,087 (after all commissions, of course), a gain of over 100%.

Our options portfolio had outperformed the purchase of stock by a huge margin – gaining 4 times as much as the stock gained. Of course, the stock has now gone even higher, and our $5000 portfolio recently surpassed the $12,000 level.

We have written up a special report which shows exactly how we gained over 100% with an options portfolio while the stock rose only 25%. You could easily use this same strategy on any stock of your own choosing, and presumably do as well (assuming that you picked a stock that went higher).

This report is worth many times the price of the entire subscription by itself. Together with my White Paper, this report is a short and complete explanation of how you can use an options strategy to double your money if the stock goes up only 25%

If you sign up by October 11, one week after the iPhone 5 was supposed to hit the shelves, we will discount our introductory package all the way down to $59.95, a full $20 lower than thousands of subscribers have paid.

This is what you get:

1)   My 70+ page White Paper which explains my favorite option strategies in detail, including my 10 Trading Rules, and 20 companies to use with the ‘Lazy Way” Strategy, (which guarantees a 100% gain in 2 years if the stock stays flat or goes up).

2)   2 FREE months of the Options Tutorial Program (a $49.90 value), which includes:

- A 14-lesson tutorial on trading stock options which will give you a thorough understanding of trading stock options.
- A weekly update of 8 actual portfolios so that you can follow their progress over time.
- Specific trades for each portfolio emailed to you so you may mirror them in your own account.
- Access to historical analytic reports and portfolio updates posted in the Insiders section of Terry’s Tips.
  - If you choose to continue after the 2 free months, do nothing, and you’ll be billed at a discounted rate of $19.95 per month.

3)    A FREE special report – “How We Made 100% with Apple in 2010-11 While the Stock Rose only 25%.”

With this one-time offer, you will receive everything for only $59.95, less than the value of the White Paper alone. But you must order by October 11, 2011. Click here – http://www.terrystips.com/order.php and enter Special Code iPhone5.

Why wait? Do it today! You will learn a strategy that could pay you back many times over, and do it every year for the rest of your investing life.

Terry

P.S. Receive the special free report entitled “How We Made 100% on Apple in 2010-11 While AAPL Rose Only 25%” in addition to all the other benefits of a Terry’s Tips subscription for the discounted special price of only $59.95, go to http://www.terrystips.com/order.php, and use Special Code iPhone5

Tags: AAPL, Auto-Trade, Calendar Spreads, Calls, Credit Spreads, ETF, Free Options Report, Monthly Options, Options Tutorial Program, Portfolio, Puts, Stocks vs. Stock Options, Terry's Tips, thinkorswim, VIX, Volatility, Weekly Options, Weekly vs. Monthly Options, White Paper, William Tell
Posted in 10K Strategies, AAPL, Last Minute Strategy, Monthly Options, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios | No Comments »

Low Cost ($180) SPY Calendar Spread Which Might Double in One Week

Monday, October 3rd, 2011

Option prices are higher than they have been in several years. Today I would like to suggest a way to capitalize on these high prices be selling some short-term premium. You might double your money in a week.

Maybe you would be unlucky and it would take two weeks to double your money (of course, there are no guarantees in the investment world, but this one looks pretty good to us).

What I am hoping is that you try this little investment, and if you are successful, you use some of your gain to join Terry’s Tips where you can get a complete education on how to generate consistent gains which could far exceed conventional investments.

Timing is everything – you act soon, you can become a Terry’s Tips Insider for a special low price (see below).

Low Cost ($180) SPY Calendar Spread Which Might Double in One Week

For the past several weeks, SPY has fluctuated in a range between $112 and $120. Right now it is resting very close to the lower end of that range. To place the spread that I am suggesting, you first need to make your best bet as to where the stock will be trading at the close of business on Friday.

Your chances of picking the right strike price are about as good as picking the right horse in a horse race, but the good thing about the calendar spread is that if your horse comes close to winning (i.e., the stock closes not too far away from your strike price choice), you can also be a winner.

When you buy a calendar spread, the maximum gain comes when the stock ends up at precisely the same price as the strike price of your spread. At that price, the short position expires worthless (or very near to it) and the long side will have more time premium than any other option in that expiration series.

Once you have made your best bet as to where the price of SPY will be next Friday, you would put this spread on placing this trade:

BTO (buy to open) 1 SPY Oct-11 115 call (SPY111022C115)
STO (sell to open) 1 SPY Oct1-11 115 call (SPY111007C115) for $1.80 (buying a calendar spread)

This sample is for the 115 strike (you might select a higher or lower strike). If you select a strike of 112 or higher, we would recommend using calls, or if lower than 112, using puts, although mathematically it makes no difference. At thinkorswim, Terry’s Tips subscribers would pay a $2.50 commission to place this spread.

The $1.80 price is what you would have had to pay last Friday. It will probably be less than this if you place the trade today or tomorrow.

You will have two opportunities to get your investment back (and hopefully, more). The first will come on Friday (October 7). You will buy back the call you sold short and sell the next-week call at the same strike. This is the trade you would make then:

BTC (buy to close) 1 SPY Oct1-11 115 call (SPY111007C115)
STO (sell to open) 1 SPY Oct2-11 115 call (SPY111014C115) for $ (selling a calendar spread)

At last Friday’s closing option prices, if the stock is trading between $113 and $116, you would be able to sell this spread for a minimum of $180. You would have all your money back, and when you made this same trade a week later (on October 21), anything you received from the sale would be pure profit.

An alternative move would be to close out the original calendar spread on October 7 rather than rolling over for another week. If the strike you selected was within $3 or $4 of the stock price on that day, you should be able to sell the spread at a profit.

This little option spread might be a way to get your feet wet in the options world, and you would learn a little about how calendar spreads work without having to wait very long to see the results. The closer your selected strike price is to the stock price when the short options expire, the greater your return.

We hope you will re-invest some of the gain you might make by taking advantage of our discounted price for new subscribers who come on board by October 11, 2011. Here is that special offer:

iPhone 5 Introduction Offer: Apple will introduce iPhone 5 on October 4. For the first time, Sprint will be able to sell an iPhone. It could be a big deal for Apple, and all of us who are betting on their stock.

On April 29, 2010, Terry’s Tips set up an actual portfolio to show how an options portfolio could outperform a stock portfolio using the same stock. We chose Apple (AAPL) as a stock that we thought would go up. On the day we set up the portfolio, AAPL was trading at $277.

In the next nine months, AAPL rose 25% and our $5000 starting portfolio value had soared to $10,087 (after all commissions, of course), a gain of over 100%.

If you sign up by October 11, one week after the iPhone 5 hits the shelves, we will discount our introductory package all the way down to $59.95, a full $20 lower than thousands of subscribers have paid.

Terry

Tags: AAPL, Calendar Spreads, ETF, Free Options Report, LEAPS, Monthly Options, Options Tutorial Program, Portfolio, Puts, SPY, Stocks vs. Stock Options, Terry's Tips, thinkorswim, Volatility, White Paper, William Tell
Posted in AAPL, Last Minute Strategy, Monthly Options, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »

Carrying Out the Last Minute Strategy

Monday, August 1st, 2011

Last week was the worst week for the market in a year. Most investors are not happy campers. A few of our portfolios did quite well, however. Our bearish one gained, of course, but two others did well in spite of the crashing averages.

Last week we discussed our William Tell portfolio which is an options bet that AAPL will move higher. Last week, the stock fell slightly, but our William Tell portfolio gained 2.3%, once again demonstrating that an options portfolio can outperform the outright purchase of stock (see free report that explains it all below).

Our Last Minute portfolio gained 27% on the amount invested last week. This is the portfolio I would like to talk about today.

Terry

Carrying Out the Last Minute Strategy

We carry out one portfolio that is a little unusual in many respects. It is entirely in cash until late in the day each Thursday. At that point, we decide whether we expect that SPY will fluctuate by more or less than a dollar on Friday. If there is an important report coming out on Friday (such as the government’s job report which is due next week on the 5th), history has shown that SPY is quite likely to move by a fairly large amount in one direction or the other. Other weeks, when the stock has moved by a dollar or more for several days in a row, we would expect that level of volatility to continue on Friday (which often has the greatest volatility of the week).

If we expect the market (SPY) to move by more than a dollar on Friday, we buy straddles or strangles. If we expect it to move by less than a dollar on Friday, we buy calendar spreads (the long side with only 8 days of remaining life and the short side with one day of remaining life).

Last Thursday, we had trouble deciding which way to go, and we decided to invest less than half our money. Ironically, we could have selected either straddles or calendars and we would have made money last week. Early in the day, the stock fell by almost $1.50, but it ended up falling only $.89 for the day.

We bought straddles, the Jul5-11 131 calls and Jul5-11 130 puts, paying $1.12 each. We bought 20 straddles, investing $2240. When the market tanked early in the morning, we sold those straddles for $1.47. We made a gain of $607, or 27% for the day (after commissions).

This was the fourth consecutive week that the Last Minute portfolio has made a gain. Over that time, we have gained a total of $2860 on an average investment of $3450. That works out to 83% on the money at risk (per unit, and many subscribers invest in lots of units).

We also would have made a gain last week if we had guessed the stock would move less than a dollar on Friday. In that case, since SPY was trading between $130 and $131, we would have bought calendar spreads at the 130 and 131 strikes (either puts or calls could have been used, but we typically would have bought put calendars at the 130 strike and call calendars at the 131 strike).

These two spreads would have made a gain if the net change in SPY for the day was less than a dollar. It was, at $.89, so we couldn’t have gone wrong last week.

We are having a lot of fun with this Last Minute portfolio, and so far, it has been quite profitable as well.

By coming on the Terry’s Tips bandwagon, you can play along with us in the Last Minute portfolio as well as 7 other portfolios, including the William Tell that has done so well as AAPL has moved higher.

We have written a detailed report on how the actual William Tell portfolio gained over 100% in 2010-11 while the stock rose only 25%. You will learn how you can use the Shoot Strategy on any other stock of your choosing as well. You can get this special report free when you subscribe to the Terry’s Tips service for a price which is less than a dinner for two at a decent restaurant – only $79.95 for the whole enchilada, including:

1) My 72-page White Paper which explains my favorite option strategies in detail, including Trading Rules for each, and 20 companies to use with the “Lazy Way” Strategy, (which guarantees a 100% gain in 2 years if the stock stays flat or goes up).

2)    2 FREE months of the Options Tutorial Program (a $49.90 value), which includes:
·   A 14-lesson tutorial on trading stock options which will give you a thorough understanding of trading stock options.
·   A weekly update of 8 actual portfolios so that you can follow their progress over time.
·   Specific trades for each portfolio emailed to you so you may mirror them in your own account if you wish.
·   Access to historical analytic reports and portfolio updates posted in the Insiders section of Terry’s Tips.
·   If you choose to continue after the 2 free months, do nothing, and you’ll be billed at a discounted rate of $19.95 per month.

3) 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 everything for only $79.95, the price of the White Paper alone. But you must order by Tuesday, August 2, 2011. Click here and enter Special Code 802 in the box at the bottom of the page to get the special Apple report as a free bonus.

Tags: AAPL, Bearish Options Strategies, Calendar Spreads, Calls, ETF, Free Options Report, Options Tutorial Program, Portfolio, Puts, shoot strategy, Stocks vs. Stock Options, Straddles, Strangles, Terry's Tips, Volatility, Weekly Options, White Paper, William Tell
Posted in AAPL, Last Minute Strategy, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »

Buying Calendar Spreads with Weekly Options

Monday, July 18th, 2011

We have a portfolio called the Last Minute portfolio. It remains in cash all week until Thursday near the close when we have to make a decision. Do we expect that SPY will fluctuate by more than a dollar, or less that a dollar on the next day.

If we think it will fluctuate less than a dollar, the best move is to buy calendar spreads, buying options with 8 days of remaining life and selling options that will expire the very next day. These spreads are designed to make money if the stock (SPY) changes by less than a dollar on Friday.

On Thursdays which precede the government monthly job reports, or when the stock option for that week has been unusually volatile, a different strategy is employed. Rather than betting that SPY will fluctuate by less than a dollar, we buy either a straddle or strangle that will most likely make money if SPY moves by more than a dollar on Friday.

Last week, there was no economic news coming out on Friday that might spook the market, but SPY had fluctuated by more than a dollar in three of the first four days that week. This would suggest that the best bet would to buy a strangle or straddle, but we did not feel too confident that the high volatility would continue, and since there is a higher risk involved in the straddle-strangle alternative, we decided to stick with calendar spreads.

With about 15 minutes of trading left on Thursday, SPY was trading at $131.10 and we bought 40 Jul4-11 – Jul-11 131 put calendar spreads, paying $.87 per spread. The stock immediately fell $.30 and we bought an additional 20 identical spreads at the 130 strike, paying $,85 for these as well. In a back test study we had learned that if a big move took place on Friday, three out of four times it was on the downside, so our initial positions should usually be set up to be bearish.

Our starting positions were heavily skewed to the downside. We could handle a $1.25 move in that direction but only a $.75 move to the upside. The actual upward move of $.76 for the day should have resulted in a break-even at best.

When the market opened up about $.40, our short position became quite uncomfortable. Shortly after the open, we were lucky enough to close out the 130 calendar spread for $.05 more than we paid for it, exactly enough to cover commissions and break even. Later in the day when SPY had fallen to near $131, we sold half our 131 spreads for $1.12, a nice premium on the $.87 cost (we gained $20 per spread after commissions, or $400 on a $1740 investment).

We were hoping that the stock would close out the day very near the current price and we would make a huge gain. We weren’t so lucky as the stock shot suddenly higher in the last half hour of trading, and we closed out the remaining spreads for $1.05 for a $14.75 gain per spread after commissions (we bought back the expiring 131 calls for $.02, avoiding the commission).

Bottom line, we were quite pleased with a 13.3% gain after commissions for the day on our capital at risk when the stock did not move in the direction we were hoping. Over the last two weeks, the Last Minute portfolio has gained $2059 on an average investment of $3630 (56%) . How many stock investments do you suppose did this well?

Tags: Calendar Spreads, Calls, ETF, Portfolio, Puts, SPY, Stocks vs. Stock Options, Straddles, Strangles, Terry's Tips, Volatility, Weekly Options, Weekly vs. Monthly Options
Posted in Last Minute Strategy, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »

Buying Strangles with Weekly Options (and How We Made 67% in a Single Day Last Week)

Monday, July 11th, 2011

We have a portfolio called the Last Minute portfolio. It remains in cash all week until Thursday near the close when calendar spreads are placed, buying options with 8 days of remaining life and selling options that will expire the very next day. These spreads are designed to make money if the stock (SPY) changes by less than a dollar on Friday (we set money aside to make a hedging bet on Friday if it becomes necessary).

On Thursdays which precede the government monthly job reports, a different strategy is employed (we have noticed that volatility tends to be extreme on those days when the jobs report comes out). Rather than betting that SPY will fluctuate by less than a dollar, we buy either a straddle or strangle that will most likely make money if SPY moves by more than a dollar on Friday.

This was the Trade Alert we sent out to Insiders on Thursday with about 10 minutes remaining in the trading day:

“July 7, 2011 Trade Alert – Last Minute Portfolio

With the government jobs report due tomorrow, we would rather bet that the stock moves by a dollar or more rather than placing calendar spreads that make a gain only if the stock moves by less than a dollar. We will invest only about a quarter of our available cash:

BTO 30 Jul2-11 135 put (SPY110708P135)

BTO 30 Jul2-11 136 call (SPY110708C136) for $.68 (buying a strangle)”

With SPY trading just about half way between $135 and $136 Thursday afternoon, we decided to buy the above strangle rather than a straddle. If the stock had been closer to one particular strike price, we would have opted for a straddle instead.

We bought 30 strangles for $68 each, investing $2040.

If at any point on Friday, SPY changed in value by more than $1.00 in either direction, we could probably sell those options at a profit. (At any price above $136.50, the calls could probably be sold for more than $68 we paid for the strangle, and at any price below $135.50, the puts could be sold for more than we paid for the strangle.) A small amount could also probably be gained by selling the other side of the strangle as well (unless the stock moved well more than a dollar).

When the government report came out on Friday, the market was spooked by the poor numbers – Non-farm private payrolls were expected to grow by 110,000 while the actual number was a disappointing 57,000. Total nonfarm payrolls grew only 18,000 compared to an expected 80,000 (government jobs dropped by 39,000). The stock (SPY) opened down $1.40 and moved down almost $2 during the day.

Early in the day while the 135 puts were trading at about $1.00, we placed a limit order to sell 25 of our 30 puts at $1.10, and the order was executed about a half hour later. This would insure that we made a profit for the day no matter what happened from that point forward. We were hoping that either the stock moved lower and we could sell the remaining 5 puts for a higher price or the stock would make a big move upward and maybe we could collect something from selling our 30 calls at the 136 strike.

The stock continued to fall, and later in the day we placed an order to sell the remaining 5 puts. We collected $1.52 ($152) each for them. That wasn’t the absolute high for the day but it was darn close. Had we waited until the close, we would have only received $.37 for those puts, and lost money on our investment. This proves the value in taking a profit on the great majority of positions whenever it might come up rather than waiting for a possible windfall gain if the stock continues in only one direction.

Bottom line, we collected a profit for the day of $1363 after commissions on our investment of $2040, or 67%.

Straddle buyers like volatility as much as we don’t like it in our other portfolios. There are many ways to profit with options. It is best to remain flexible, and use the option strategy that best matches current market conditions. Buying straddles or strangles when option prices are low and volatility is high is one very good way to make extraordinary gains, as we happily did last week.

The downside to buying straddles or strangles is that if the market doesn’t fluctuate much, you could lose every penny of your investment (although if you don’t wait too much longer than mid-day on the day options expire, even out-of-the-money options retain some value and should be able to be sold for something). This makes it a much riskier investment than the other option strategies we recommend at Terry’s Tips. However, straddle- or strangle-buying can be quite profitable if the current market patterns persist.

Tags: Calendar Spreads, Calls, Puts, SPY, Straddles, Strangles, Volatility, Weekly Options
Posted in Last Minute Strategy, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »

Buying Straddles with Weekly Options

Thursday, July 7th, 2011

Buying Straddles with Weekly Options

For the past 7 days, SPY had fluctuated more than $1.00 every day. One of the portfolios that we carry out at Terry’s Tips involves placing calendar spreads near the close on Thursday (buying options with 8 days of remaining life and selling options that will expire the next day). The risk profile graph for these spreads shows that a profit will be made if SPY fluctuates by less than a dollar in either direction on Friday (which it has done historically most of the time).

However, with 7 consecutive days of greater-than-$1.00 fluctuations, it did not seem like a prudent bet to place calendar spreads on Thursday (especially since SPY tends to be more volatile on Fridays when the Weekly options expire than it is on the other days).

Instead of buying calendar spreads, we bought SPY 132 puts and calls which would expire on Friday, paying $97 for each pair (with commissions, $99.50 each). At the time, SPY was trading right at $132.

This is called buying a straddle. If at any point on Friday, SPY changed in value by more than $1.00 in either direction, we could sell those options at a profit. (At any price above $133, the calls could be sold for more than we paid for the straddle, and at any price below $131, the puts could be sold for more than we paid for the straddle.)

SPY managed to change $2.00, beating the $1.00 threshold for the 8th consecutive day. Subscribers who held their straddles until near the close were able to double their money on Friday (admittedly, most of us pulled the trigger earlier than that, but I did manage to keep a few spreads until the end in my personal account).

Straddle buyers like volatility as much as we don’t like it in our other portfolios. What they like best is a whip-saw market where the market moves sharply higher (and they sell their calls) and then down (when they unload their puts). There are many ways to profit with options. Buying straddles when option prices are low and volatility is high is one very good way to make extraordinary gains.

The downside to buying straddles is that if the market doesn’t fluctuate much, you could lose every penny of your investment. This makes it a much riskier investment than the other option strategies we recommend at Terry’s Tips. However, straddle-buying can be quite profitable if the current market patterns persist.

Tags: Calendar Spreads, Calls, Credit Spreads, Puts, Straddles, Volatility
Posted in Last Minute Strategy, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, Weekly Options | No Comments »

Archive for the ‘Last Minute Strategy’ Category

If the market knocks you down, try laughing instead of crying –

Follow-Up on Low Cost SPY Calendar Spread

Low Cost ($180) SPY Calendar Spread Which Might Double in One Week

Carrying Out the Last Minute Strategy

Buying Calendar Spreads with Weekly Options

Buying Strangles with Weekly Options (and How We Made 67% in a Single Day Last Week)

Buying Straddles with Weekly Options

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