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Archive for the ‘Stock Options Strategies’ Category

Buy the Dip in Taiwan Semiconductor (TSM)

Monday, January 25th, 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.

TSM’s solid fundamentals and positive technical outlook makes it an attractive stock to buy on dips. Take a look at what the following two articles have to say about the company’s growth prospects – Taiwan Semi Is Betting $28 Billion on Rising Demand for Chips and Taiwan Semiconductor Manufacturing: Our Top Technology Pick For 2021 Is At The Heart Of The Next Wave Of Technology.

Technicals

If you zoom out to a larger timeframe like a weekly or monthly chart, it’s pretty much been a straight line up for TSM. The stock has posted a 47% gain over the last three months and has advanced 124% from a year ago. Dips have been shallow during this time which means the current 5% decline from recent highs could be a buying oppurtunity. Support is in play from the lower line of a rising trend channel that has contained price action since late December. There is also a horizontal level near the bottom of the channel at $128.50 to create a support confluence.

TSM Chart January 2021 - Straight up trend

TSM Chart January 2021

If you agree there’s further upside ahead for TSM, consider this trade which relies on the stock remaining above $129 through the expiration in five weeks.

Buy To Open TSM 26FEB21 126 Puts (TSM210226P126)
Sell To Open TSM 26FEB21 129 Puts (TSM210226P129) for a credit of $1.45 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when TSM was trading near $129.  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 $143.70. This reduces your buying power by $300 and makes your investment $156.30 ($300 – $143.70).  If TSM closes at any price above $129 on February 26, both options will expire worthless, and your return on the spread would be 92% ($143.70 / $156.30), or 1049% annualized.

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

IBD Underlying Updates January 23, 2021

IBD Underlying Updates January 23, 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

Advanced Micro Devices Signals More Upside After Breaking to a Record High

Monday, December 21st, 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.

AMD has been in a steady uptrend since the start of November and looks set to continue the trend. Check out what the following two articles have to say about the stock – Buying Stocks for Christmas? Put These Tech Stocks Under the Tree and Jim Cramer: Focus on Single Semiconductor Names, Stay Away from ETF Baskets.

Technicals

From a technical standpoint, AMD has confirmed that it has resumed the uptrend by breaking above the September peak. The stock now shows strong support near the September high, around $94. Further support is found slightly below it from a confluence created by the 20-Day moving average and the lower line of a rising trend channel. In addition to the technical chart, AMD has been steadily outperforming the semiconductor index (SOX) and Intel (INTC) for four years.

AMD Chart December 2020 - record breaking momentum

AMD Chart December 2020

If you agree there’s further upside ahead for AMD, consider this trade which relies on the stock remaining above $96 through the expiration in five weeks.

Buy To Open AMD 22JAN21 93 Puts (AMD210122P93)
Sell To Open AMD 22JAN21 96 Puts (AMD210122P96) for a credit of $1.10 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when AMD was trading near $96.  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 $108.70. This reduces your buying power by $300 and makes your investment $191.30 ($300 – $108.70).  If AMD closes at any price above $96 on January 22, both options will expire worthless, and your return on the spread would be 57% ($108.70 / $191.30), or 650% annualized.

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

IBD Underlying Updates December 19, 2020

IBD Underlying Updates December 19, 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

Consider Adobe (ADBE) After the Latest Earnings Report

Monday, December 14th, 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 been a regular on the IBD Top 50 list over the past few years and is a favorite among analysts. Check out what the following two reports have to say about it – This Is Adobe’s Must-Hold Support Level if You Buy the Earnings Dip and Adobe (ADBE) Perfectly Positioned for New Highs.

Technicals

Both of the articles linked above discuss a technical outlook for ADBE and for good reason. The stock trades near several moving averages on a daily chart and is also testing support from a rising trendline that originates from a low posted in early November. It’s rare to see such a strong confluence of support lining up in this way and considering the strength this stock has displayed over the years, the odds favor a move to the upside from this point.

ADBE Chart December 2020

ADBE Chart December 2020

If you agree there’s further upside ahead for ADBE, consider this trade which relies on the stock remaining above $475 through the expiration in five weeks.

Buy To Open ADBE 22JAN21 472.5 Puts (ADBE210122P472.5)
Sell To Open ADBE 22JAN21 475 Puts (ADBE210122P475) for a credit of $1.18 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when ADBE was trading near $476.  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 $116.70. This reduces your buying power by $250 and makes your investment $133.30 ($250 – $116.70).  If ADBE closes at any price above $475 on January 22, both options will expire worthless, and your return on the spread would be 88% ($116.70 / $133.30), or 1004% annualized.

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

IBD Underlying Updates December 12, 2020

IBD Underlying Updates December 12, 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

Will Amazon (AMZN) Break Higher Into the Year-End?

Monday, November 30th, 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.

AMZN is up 74% in the year thus far and looks poised to continue the uptrend. The following two articles highlight some of the reasons investors may continue to push the stock price higher –  Cramer’s Year-End Game Plan: Load Up On Digital Retailers and Wall Street Analysts Say These 5 Stocks Are A Buy As The World Prepares For The Post-COVID-19 Era.

Technicals

AMZN has been consolidating sideways within a triangle since the start of September. These types of consolidations often end with an upward break when they are preceded by a strong bullish trend. On a monthly chart, the stock is set to print a bullish reversal candlestick pattern which hints that the uptrend might be restarting. Lastly, as mentioned in one of the articles above, seasonality patterns show that AMZN typically performs well in this part of the year.

AMZN Chart November 2020 - Year end upwards break

AMZN Chart November 2020

If you agree there’s further upside ahead for AMZN, consider this trade which relies on the stock remaining above $3195 through the expiry in six weeks.

Buy To Open AMZN 8JAN21 3190 Puts (AMZN210108P3190)
Sell To Open AMZN 8JAN21 3195 Puts (AMZN210108P3195) for a credit of $2.55 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when AMZN was trading near $3195.  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 $253.70. This reduces your buying power by $500 and makes your investment $246.30 ($500 – $253.70).  If AMZN closes at any price above $3195 on January 8, both options will expire worthless, and your return on the spread would be 103% ($253.70 / $246.30), or 964% annualized.

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

IBD Underlying Updates November 28, 2020

IBD Underlying Updates November 28, 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

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

Dollar General (DG) Looks Set to Continue the Steady Rise

Monday, September 14th, 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.

Several Analysts have good things to say about DG, here are two of them – 2 Top Stocks to Buy in September and Hedge Funds Keep Buying Dollar General Corp.

Technicals

DG has been trading within a rising trend channel for just over four months. The 50-day moving average is currently near the lower boundary of the channel to offer a confluence of support. A test of this support zone in the past week resulted in a move higher which shows that buyers are willing to defend this area. In addition to the steady trend, DG has outperformed most of the stocks on the IBD Top 50 list over the past few weeks.

DG Chart September 2020 - Rising Trend

DG Chart September 2020

If you agree there’s further upside ahead for DG, consider this trade which relies on the stock remaining above $200 through the expiration on October 16.

Buy To Open DG 16OCT20 195 Puts (DG201016P195)
Sell To Open DG 16OCT20 200 Puts (DG201016P200) for a credit of $1.98 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when DG was trading near $200.  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 $196.70. This reduces your buying power by $500 and makes your investment $303.30 ($500 – $196.70).  If DG closes at any price above $200 on October 16, both options will expire worthless, and your return on the spread would be 65% ($196.70 / $303.30), or 741% annualized.

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

IBD Underlying Updates September 12, 2020

IBD Underlying Updates September 12, 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

Microsoft (MSFT) – Recent Tech Sell-Off Offers a Buying Opportunity

Monday, September 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.

The following two articles offer compelling reasons why MSFT could move higher. The first is an analyst upgrade with a price target of $240 – Microsoft Stock (MSFT) Gets Price Target Increase To $240 From Mizuho. The second article outlines MSFT’s competitive advantages –  2 Tech Stocks That Are Thriving Despite the Coronavirus.

Technicals

We offered a trade idea in MSFT at the start of August and the option spread used in the idea expired for a 74% profit on Friday. Because of the decline over the past few days, the stock is once again testing the same trendline that made the trade attractive last time around. The 50-day moving average is also in play and this is an indicator the stock has not closed below in over four months. Friday’s candlestick formation signals buying activity and that the support confluence is being defended, at least so far.

MSFT Chart September 2020

MSFT Chart September 2020

If you agree there’s further upside ahead for MSFT, consider this trade which relies on the stock remaining above $212.50 through expiration on October 9.

Buy To Open MSFT 09OCT20 210 Puts (MSFT201009P210)
Sell To Open MSFT 09OCT20 212.5 Puts (MSFT201009P212.5) for a credit of $1.20 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when MSFT was trading near $214.  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 $118.70. This reduces your buying power by $250 and makes your investment $131.30 ($250 – $118.70).  If MSFT closes at any price above $212.50 on October 9, both options will expire worthless, and your return on the spread would be 90% ($118.70 / $131.30), or 1027% annualized.

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

IBD Underlying Updates September 5, 2020

IBD Underlying Updates September 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

Netflix (NFLX) Regains Upward Momentum

Monday, August 31st, 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.

NFLX rallied to a six-week high in the past week and shows the potential to continue higher. The following two articles outline reasons why the stock could continue the momentum – Hooking Up or Locking Down, Netflix Poised to Win Either Way, and Netflix (NFLX) Back in Rally Mode After Brief Correction.

Technicals

NFLX has rallied above a horizontal level near $510, which hints that the correction from mid-July to mid-August may have ended. The same level contained an earlier range and may now act as support on near-term declines. There is further support from the lower boundary of a trend channel that has encompassed the price action since March.

NFLX Chart August 2020 regains upward momentum

NFLX Chart August 2020

If you agree there’s further upside ahead for NFLX, consider this trade, which relies on the stock remaining above the 520 level during the next five weeks:

Buy To Open NFLX 2OCT20 515 Puts (NFLX201002P515)
Sell To Open NFLX 2OCT20 520 Puts (NFLX201002P520) for a credit of $3.30 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when NFLX was trading near $524. 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 $328.70. This reduces your buying power by $500 and makes your investment $171.30 ($500 – $328.70).  If NFLX closes above $520 on October 2, both options will expire worthless, and your return on the spread would be 192% ($328.70 / $171.30), or 2,190% annualized.

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

IBD Underlying Updates August 29, 2020

IBD Underlying Updates August 29, 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

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Success Stories

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

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