from the desk of Dr. Terry F Allen

Skip navigation

Member Login  |  Contact Us  |  Sign Up

1-800-803-4595

Terry's Tips Stock Options Trading Blog

Option Idea Which Must Be Executed Before Market Closes November 1st

November 1st, 2016

Option Idea Which Must Be Executed Before Market Closes November 1st

I am sorry to send you a second email message today, but I need to hurry because it will disappear tomorrow. It involves Gilead Sciences (GILD)

Gilead (GILD) announces earnings on Tuesday, November 1st after the close. The post-announcement options are extremely expensive. Implied Volatility (IV) for the 04Nov16 series is 60 compared to 34 for the 16Dec16 series which expires six weeks later. The company has fallen 32% from its 52-week high and pays a dividend of 2.5% and has a p/e of only 6.4 which should provide some level of support. Expectations are for lower sales and earnings. These facts support the idea that a big drop in stock price is unlikely after the announcement. This trade will make money if the stock is flat or goes up by any amount (a maintenance requirement of $400 per spread, less the amount of the credit, will result):

Buy To Open 1 GILD 16Dec16 70 put (GILD161216P70)

Sell To Open 1 GILD 04Nov16 74 put (GILD161104P74) for a credit of $.25 (buying a diagonal)

We bought 5 contracts of exact spread today in our portfolio that trades on earnings announcements. It will make a maximum gain if the stock closes on Friday exactly at $74. Any price higher than that will also result in a profit. The stock should be able to fall about $2 before any loss should appear on the downside. . . .

Halloween Special Expires at Midnight Tonight

October 31st, 2016

Halloween Special Expires at Midnight Tonight

I want to send you a copy of the October 29, 2016 Saturday Report, the weekly email sent to paying subscribers to Terry’s Tips. This report details how our 13 actual portfolios perform each week. Last week was a down one for the market (SPY lost 0.7%), and many of our portfolios experienced a similar loss. Others did considerably better.

The portfolio based on Johnson and Johnson (JNJ) gained 25% while the stock rose 1.7%. The portfolio based on Facebook (FB) gained 8.7% even though FB fell by 0.6% last week. This portfolio was started with $6000 one year and three weeks ago, and is now worth $13,449, a gain of 124%.

One of our portfolios invests in companies which are about to announce earnings, and closes out the positions on the Friday after the announcement. Last week, we closed out our spreads in Mastercard (MA) which had been put on only a week and a half earlier. We enjoyed a gain of 34.3% (after commissions, as is the case for all of these portfolios).

Finally, we have a portfolio that is . . .

Halloween Special – Lowest Subscription Price Ever

October 18th, 2016

Halloween Special – Lowest Subscription Price Ever

Why must Halloween be only for the kids? You got them all dressed up in cute little costumes and trekked around the neighborhood in hopes of bringing home a full basket of cavity-inducing treats and smiles all around.

But how about a treat for yourself? You may soon have some big dental bills to pay. What if you wanted to learn how to dramatically improve your investment results? Don’t you deserve a little something to help make that possible?

What better Halloween treat for yourself than a subscription to Terry’s Tips at the lowest price ever? You will learn exactly how we have set up and carried out an options strategy that doubled the starting portfolio value (usually $5000) of five individual investment accounts which traded Costco (COST), Apple (AAPL), Nike (NKE), Starbucks (SBUX), and Johnson & Johnson (JNJ), including all commissions. These portfolios took between 7 and 17 months to double their starting value, and every single portfolio managed to accomplish that goal.

One year and one week ago, we set up another portfolio to trade Facebook (FB) options, this time starting with $6000. It has now gained over 97% in value. We expect that in the next week or two, it will surge above $12,000 and accomplish the same milestone that the other five portfolios did.

Many subscribers to Terry’s Tips have followed along with these portfolios since the beginning, having all their trades made for them through the Auto-Trade program at thinkorswim. Others have followed our trades on their own at another broker. Regardless of where they traded, they are all happy campers right now.

We have made these gains with what we call the 10K Strategy. It involves selling short-term options on individual stocks and using longer-term (or LEAPS) as collateral. It is sort of like writing calls, except that you don’t have to put up all that cash to buy 100 or 1000 shares of the stock. The 10K Strategy is sort of like writing calls on steroids. It is an amazingly simple strategy that really works with the one proviso that you select a stock that stays flat or moves higher over time.

How else in today’s investment world of near-zero dividend yields can you expect to make these kinds of returns? Find out exactly how to do it by buying yourself a Halloween treat for yourself and your family. They will love you for it.

Lowest Subscription Price Ever

As a Halloween special, we are offering the lowest subscription price than we have ever offered – our full package, including all the free reports, my White Paper, which explains my favorite . . .

How to Make 40% With a Single Options Trade on a Blue Chip Stock

October 11th, 2016

Bernie Madoff got billions of dollars from investors by offering 12% a year. Today I would like to share an investment which should deliver more than triple that return. I doubt if it gets Madoff-like money flowing into it, but maybe some of you will try it along with me. Nothing is 100% guaranteed, but the historical price action for this conservative stock shows that this options spread would make over 40% a whopping 98% of the time.

Terry

How to Make 40% With a Single Options Trade on a Blue Chip Stock

Johnson & Johnson (JNJ) is a $70 billion multinational medical devices, pharmaceutical and consumer packaged goods manufacturer founded in 1886. It is truly a “blue chip” stock which pays a 2.7% dividend and raises it almost every year.

JNJ has been a favorite underlying stock for us at Terry’s Tips. Early in November 2015 we . . .

Calendar Spreads Tweak #5 (Like Writing Calls on Steroids)

October 6th, 2016

Lots of people like the idea of writing calls. They buy stock and then sell someone else the right to repurchase their shares (usually at a higher price) by selling a call against their shares. If the stock does not go up by the time that the call expires, they keep the proceeds from the sale of the call. It is sort of like a recurring dividend.

If writing calls appeals to you, today’s discussion of an option strategy is right up your alley. This strategy is like writing calls on steroids.

Terry

Calendar Spreads Tweak #5 (Like Writing Calls on Steroids)

When you set up a calendar spread, you buy an option (usually a call) which has a longer life than the same-strike call that you sell to someone else. Your expected profit comes from the well-known fact that the longer-term call decays at a lower rate than the shorter-term call you sell to someone else. As long as the stock does not fluctuate a whole lot, you are guaranteed to . . .

IBM Pre-Announcement Play

September 30th, 2016

IBM announces earnings on October 17, less than three weeks from now. I would like to share with you a strategy I used today to take advantage of the extremely high option prices which exist for the option series that expires on October 21, four days after the announcement. I feel fairly confident I will eventually make over 100% on one or both of these trades before the long side expires in six months.

Terry

IBM Pre-Announcement Play

One of my favorite option strategies is to buy one or more calendar spreads on a company that will be announcing earnings in a few weeks. The option series which expires directly after the announcement experiences an elevated Implied Volatility (IV) relative to all the other option series. A high IV means that those options are relatively expensive compared to all the other options that are trading on that stock.

IV for the post-announcement series soars because of the well-known tendency for stock prices to fluctuate far more than usual once the announcement is made. It may go up if investors are pleased with the company’s earnings, sales, or outlook, or it may tumble because investors were expecting more. While there is some historical evidence that the stock usually moves in the opposite direction that it did in the week or two leading up to the announcement, it is not compelling enough to always bet that way.

IBM has risen about $5 over the last week, but it is trading about equal to where it was two weeks ago, so there is no indication right now as to what might happen after the announcement.

IBM has fluctuated by just under 4% on average over the last few announcement events. That would make an average of $6 either way. I really have no idea which way it might go after this announcement, but it has been hanging out around it/s current level (just under $160) for a while, so I am planning to place my bet around that number

In the week leading up to . . .

Calendar Spreads Tweak #4

September 21st, 2016

Today I would like to discuss how you can use calendar spreads for a short-term strategy based around the date when a stock goes ex-dividend. I will tell you exactly how I used this strategy a week ago when SPY paid its quarterly dividend.

Terry

Calendar Spreads Tweak #4

Four times a year, SPY pays a dividend to owners of record on the third Friday of March, June, September, and December. The current dividend is about $1.09. Each of these events presents a unique opportunity to make some money by buying calendar spreads using puts to take advantage of the huge time premium in the puts in the days leading up to the dividend day.

Since the stock goes down by the amount of the dividend on the ex-dividend day, the option market prices the amount of the dividend into the option prices. Check out the situation for SPY on Wednesday, September 14, 2016, two days before an expected $1.09 dividend would be payable. At the time of these prices, SPY was trading just about $213.70.

Calendar Spreads Tweak #2

September 7th, 2016

This week we will continue our discussion of a popular option spread – the calendar spread which is also called a time spread or horizontal spread. We will compare the expected costs and potential returns if you select different time periods for the long and short sides of the calendar spread.

Terry

Calendar Spreads Tweak #2

First, let’s look at a typical calendar spread on Facebook (FB). Today, the stock is trading just over $130, and you might buy an at-the-money calendar spread by placing this order:

Buy To Open 1 FB 16Dec16 130 call (FB161216C130)
Sell To Open 1 FB 14Oct16 130 call (FB161014C130) for a debit of $3.75 (buying a calendar)

This spread would cost about $3.75 ($375) to buy, plus $2.50 in commissions at the rate Terry’s Tips’ subscribers pay at thinkorswim, for

Calendar Spreads Tweak #1

September 1st, 2016

This week we will continue our discussion of a popular option spread – the calendar spread which is also called a time spread or horizontal spread. We will check out the feasibility of buying spreads at different strike prices in an effort to reduce risk.

Terry

Calendar Spreads Tweak #1: First, let’s look at a typical calendar spread on Facebook (FB). Last Friday, when FB was trading about $124.20, we bought 5-month-out 20Jan17 calls and sold one-month-out 30Sep16 calls. The spread would cost $5.43 ($543), and this is what the risk profile graph looked like:

All About, or at Least an Introduction to Calendar Spreads

August 25th, 2016

This week I would like start an ongoing discussion about one of my favorite option plays. It is called a calendar spread. It is also known as a time spread or a horizontal spread. But most people call it a calendar because that’s where you focus much of your attention while you hold this kind of a spread. On a specific date on the calendar, you discover whether you made or lost money since you first bought the calendar spread. In the next few blogs, I will discuss all sorts of variations and permutations you can make with calendar spreads, but today, we will focus on a bare bones explanation of the basic spread investment.

Terry

All About, or at Least an Introduction to Calendar Spreads

A calendar spread consists of the simultaneous purchase of one option (either a put or a call) and the sale of another option (either a put or call), with both the purchase and the sale at the same strike price, and the . . .

Making 36%

Making 36% — A Duffer's Guide to Breaking Par in the Market Every Year in Good Years and Bad

This book may not improve your golf game, but it might change your financial situation so that you will have more time for the greens and fairways (and sometimes the woods).

Learn why Dr. Allen believes that the 10K Strategy is less risky than owning stocks or mutual funds, and why it is especially appropriate for your IRA.

Order Now

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.

~ John Collins