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Terry's Tips Stock Options Trading Blog

Six-Month Review of Our Options Strategies – Part 1

June 30th, 2014

We have just finished the first half of 2014. It has been a good year for the market. It’s up about 6.7%. Everyone should be fairly happy. The composite portfolios conducted at Terry’s Tips have gained 16% over these months, almost 2 ½ times as much as the market rose. Our subscribers are even happier than most investors.

Our results would have been even better except for our one big losing portfolio which has lost nearly 80% because we tried something which was exactly the opposite to the basic strategy used in all the other portfolios (we essentially bought options rather than selling short-term options as our basic strategy does). In one month, we bought a 5-week straddle on Oracle because in was so cheap, and the stock did not fluctuate more than a dollar for the entire period. We lost about 80% of our investment. If we had bought a calendar spread instead (like we usually do), it would have been a big winner.

Today I would like to discuss the six-month results of a special strategy that we set up in January which was designed to make 100% in one year with very little (actually none) trades after the first ones were placed.

Terry

Six-Month Review of Our Options Strategies:

We have a portfolio we call Better Odds Than Vegas. In January, we picked . . .

Maybe it’s Time to Buy Options Rather Than Sell Them

June 23rd, 2014

Last week I recommended buying a calendar spread on SVXY to take advantage of the extremely high option prices for the weekly options (at-the-money option prices had more than doubled over the past two weeks). The stock managed to skyrocket over 7% for the week and caused the calendar spread to incur a loss. When you sell a calendar spread, you want the stock to be trading very close to the strike price when the short options expire. When the underlying stock makes a big move in either direction, you generally lose money on these spreads, just as we did last week.

Ironically, this spread . . .

An Interesting Trade to Make on Monday

June 16th, 2014

The recent developments in Iraq have nudged options volatility higher, but for one underlying, SVXY, it has apparently pushed IV through the roof. This development has brought about some potentially profitable option spread possibilities.

Terry

An Interesting Trade to Make on Monday

In case you don’t know what . . .

Check Out the Volatility in SVXY

June 9th, 2014

This week is a further discussion of my favorite ETP (Exchange Traded Product), SVXY. We have already discussed this unusual equity. Because of contango, it is destined to move higher every week that there is not a market crash or correction. It has doubled in value in each of the last two years. If you have an idea of which way an underlying is headed, there are extremely attractive option strategies that you might use. I will talk about one such strategy this week.

Terry

Check Out the Volatility in SVXY

Every week for the past four weeks in my personal . . .

Contango, Backwardation, and SVXY

May 19th, 2014

This week I would like to introduce you to a thing called contango. This is relevant today because contango just got higher than I have seen it in many years – over 10% while most of the time, it hangs out in the 3% – 4% range. This measure becomes important when you are trading in my favorite ETP (Exchange Traded Product), SVXY. If your eyes haven’t glazed over yet, read on.

Terry

Contango, Backwardation, and SVXY

There seems to be a widespread need . . .

A Look at the Downsides of Option Investing

May 12th, 2014

Most of the time we talk about how wonderful it is to be trading options. In the interests of fair play, today I will point out the downsides of options as an investment alternative.

Terry

A Look at the Downsides of Option Investing

1. Taxes. Except in very rare circumstances, all gains are taxed as short-term capital gains. This is essentially the same as ordinary income. The rates are as high as your individual personal income tax rates. Because of

Volatility’s Impact on Option Prices

April 28th, 2014

Today I would like to talk a little about an important measure in the options world – volatility, and how it affects how much you pay for an option (either put or call).

Terry

Volatility’s Impact on Option Prices

Volatility is the sole variable that can only be measured after the option prices are known. All the other variables have precise mathematical measurements, but volatility has an essentially emotional component that defies easy understanding. If option trading were a poker game, volatility would be . . .

How Option Prices are Determined

April 21st, 2014

Last week was one of the best for the market in about two years. Our option portfolios at Terry’s Tips made great gains across the board as well. One portfolio gained 55% for the week, in fact. It is fun to have a little money tied up in an investment that can deliver those kinds of returns every once in a while.

This week I would like to discuss a little about what goes into an option price – what makes them what they are?

Terry

How Option Prices are Determined

Of course, the market ultimately determines the . . .

An Interesting Calendar Spread Trade Idea

April 14th, 2014

Today I would like to share with you an investment I made in my personal account just today. It involves buying three calendar spreads and waiting about a month to see if you hit the jackpot. See if you agree with me that it is a potentially great trade.

Terry

An Interesting Calendar Spread Trade Idea

The underlying company is Keurig Green Mountain Coffee (GMCR). I have traded options on this company almost every week for the last few years. I like it because the options carry an exceptionally high implied volatility (IV) because the stock has been so volatile.

Using Puts vs. Calls for Calendar Spreads

April 7th, 2014

I like to trade calendar spreads. Right now my favorite underlying to use is SVXY, a volatility-related ETP which is essentially the inverse of VXX, another ETP which moves step-in-step with volatility (VIX). Many people buy VXX as a hedge against a market crash when they are fearful (volatility, and VXX. skyrockets when a crash occurs), but when the market is . . .

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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.

~ John Collins