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Invest in Yourself in 2013 (at the Lowest Rate Ever)

Monday, December 31st, 2012

To celebrate the coming of the New Year I am making the best offer to come on board that I have ever offered.  It is time limited.  Don’t miss out.

Invest in Yourself in 2013 (at the Lowest Rate Ever)

The presents are unwrapped.  The New Year is upon us.  Start it out right by doing something really good for yourself, and your loved ones. 

The beginning of the year is a traditional time for resolutions and goal-setting.  It is a perfect time to do some serious thinking about your financial future.

I believe that the best investment you can ever make is to invest in yourself, no matter what your financial situation might be.  Learning a stock option investment strategy is a low-cost way to do just that.

As our New Year’s gift to you, we are offering our service at the lowest price in the history of our company.      If you ever considered becoming a Terry’s Tips Insider, this would be the absolutely best time to do it.  Read on…

Don’t you owe it to yourself to learn a system that carries a very low risk and could gain 36% a year as many of our portfolios have done?

So what’s the investment?  I’m suggesting that you spend a small amount to get a copy of my 70-page (electronic) White Paper, and devote some serious early-2013 hours studying the material. 

And now for the Special Offer – If you make this investment in yourself by midnight, January 9, 2013, this is what happens:

For a one-time fee of only $39.95, you receive the White Paper (which normally costs $79.95 by itself), which explains my two favorite option strategies in detail, 20 “Lazy Way” companies with a minimum 100% gain in 2 years, mathematically guaranteed, if the stock stays flat or goes up, plus the following services :

1) Two free months of the Terry’s Tips Stock Options Tutorial Program, (a $49.90 value).  This consists of 14 individual electronic tutorials delivered one each day for two weeks, and weekly Saturday Reports which provide timely Market Reports, discussion of option strategies, updates and commentaries on 8 different actual option portfolios, and much more. 

2) Emailed Trade Alerts.  I will email you with any trades I make at the end of each trading day, so you can mirror them if you wish (or with our Premium Service, you will receive real-time Trade Alerts as they are made for even faster order placement or Auto-Trading with a broker).  These Trade Alerts cover all 8 portfolios we conduct.

3) If you choose to continue after two free months of the Options Tutorial Program, do nothing, and you’ll be billed at our discounted rate of $19.95 per month (rather than the regular $24.95 rate).

4) Access to the Insider’s Section of Terry’s Tips, where you will find many valuable articles about option trading, and several months of recent Saturday Reports and Trade Alerts.

5) A FREE special report “How We Made 100% on Apple in 2010-11 While AAPL Rose Only 25%”. This report is a good example of how our Shoot Strategy works for individual companies that you believe are headed higher.

With this one-time offer, you will receive all of these benefits for only $39.95, less than the price of the White Paper alone. I have never made an offer better than this in the twelve years I have published Terry’s Tips.  But you must order by midnight on January 9, 2013.  Click here, choose “White Paper with Insider Membership”, and enter Special Code 2013 (or 2013P for Premium Service – $79.95).

Investing in yourself is the most responsible New Year’s Resolution you could make for 2013.  I feel confident that this offer could be the best investment you ever make in yourself.

Happy New Year!  I hope 2013 is your most prosperous ever.  I look forward to helping you get 2013 started right by sharing this valuable investment information with you. 
Terry

P.S.  If you would have any questions about this offer or Terry’s Tips, please call Seth Allen, our Senior Vice President at 800-803-4595.  Or make this investment in yourself at the lowest price ever offered in our 8 years of publication – only $39.95 for our entire package - using Special Code 2013 (or 2013P for Premium Service – $79.95).

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Posted in 10K Strategies, AAPL, Lazy Way Strategy, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | 1 Comment »

An Options Strategy for Apple Bulls to Protect Against a $50 Drop in the Stock Price

Monday, October 8th, 2012

I have submitted an article to Seeking Alpha that I would like to share with you.

An Options Strategy for Apple Bulls to Protect Against a $50 Drop in the Stock Price

Here’s the link – Apple Option Strategy

There seems to be a lot of interest in Apple (AAPL) these days.  While many investors are bullish on the long-run prospects for the company, many are concerned that in the short run they may have to endure a good-size drop in the stock price. 

A properly-devised options strategy can protect you against a $50 drop in the price while leaving you plenty of room to prosper if the stock continues to rise over time.

Any questions?   I would love to hear from you by email (terry@terrystips.com), or if you would like to talk to our guy Seth, give him a jingle at 800-803-4595 and either ask him your question(s) or give him your thoughts.

You can see every trade made in 8 actual option portfolios conducted at Terry’s Tips and learn all about the wonderful world of options by subscribing here.   Why wait any longer to make this important investment in yourself?

I look forward to having you on board, and to prospering with you.

Terry

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Posted in AAPL, Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »

Back-Testing the 10K Classic Options Strategy

Monday, June 25th, 2012

This week I would like to share a report I sent to paying subscribers this week.  It is a back test of a portfolio we set up just a month ago to carry out the precise strategy outlined in my book, Making 36%: Duffer’s Guide to Breaking Par in the Market Every Year in Good Years and Bad (the revised 2012 edition is the 5th printing).  I believe it gives a definitive answer to the question “Do calendar spreads really work?”

Back-Testing the 10K Classic Options Strategy

The originally-stated goal of the 10K Classic portfolio was to deliver consistent 3% monthly gains and never have a losing month.  This portfolio uses S&P 500 tracking stock (SPY) as the underlying, and uses true deep in-the-money LEAPS as the long side (a full 19 months out to start) and Weekly short calls at several strikes both above the stock price (usually 2 out of 5 to start the week) and below the stock price (usually 3 out of 5 to start the week).  We generally do not make any adjustment trades until Thursday when some calls might be rolled to the next Weekly series at a different strike to make the portfolio more neutral net delta.

I wanted to see what would happen if we made absolutely no adjustments to the 10K Classic during the week based on the risk profile graph of the $9800 portfolio on June 15, 2012 and the weekly price changes for SPY that had taken place over the past 100 weeks.  Here are the results:

This table groups the weekly price changes in dollars into 19 groups and multiplies the number of occurrences in each group by the loss or gain that would have occurred with that price change according to the risk profile graph displayed with the thinkorswim software.  I reduced the indicated gain or loss by $50 each week to account for commission costs and transaction costs (we typically buy back out-of-the-money expiring calls for $3 or so, or pay a small premium when rolling over in-the-money calls).  Of course, VIX was relatively high on this date (about 22), so the gains might be less if VIX were appreciably lower.

In 76% of the weeks, a gain would have been made and in 24% of the weeks, a loss would have resulted. In the gaining weeks, the average gain was $284 and the in the losing weeks, the average loss was $445.   On an average of once a year (1 week out of each 50), a greater-than-15% loss would have occurred if no adjustments were made.

The bottom line is most encouraging.  It says that the portfolio would earn 100% over two years if those positions were in place and no adjustments were made during the week.  In order to carry out a strategy of making no adjustments, however, we would have to be willing to tolerate a weekly loss of about $1400 once every year.  

Since about two weeks a year, very large weekly losses might occur (averaging about $1000), it seems best to slightly alter our goal of never having a losing month.  When we encounter one of these weeks, the other 3 weeks of the month might not always do well enough to cover that large a loss.  Our new goal will to never have a losing month as long as the stock does not fluctuate more than $7 in one week during the month.  The more important 3%-a-month goal will continue to be in place. 

The first month for the portfolio (up 5.1%) is certainly an encouraging start, especially with the volatility that we experienced during that time period. 

The originally-stated goal of the 10K Classic portfolio was to deliver consistent 3% monthly gains and never have a losing month.  This portfolio uses S&P 500 tracking stock (SPY) as the underlying, and uses true deep in-the-money LEAPS as the long side (a full 19 months out to start) and Weekly short calls at several strikes both above the stock price (usually 2 out of 5 to start the week) and below the stock price (usually 3 out of 5 to start the week).  We generally do not make any adjustment trades until Thursday when some calls might be rolled to the next Weekly series at a different strike to make the portfolio more neutral net delta.

I wanted to see what would happen if we made absolutely no adjustments to the 10K Classic during the week based on the risk profile graph of the $9800 portfolio on June 15, 2012 and the weekly price changes for SPY that had taken place over the past 100 weeks.  Here are the results:

This table groups the weekly price changes in dollars into 19 groups and multiplies the number of occurrences in each group by the loss or gain that would have occurred with that price change according to the risk profile graph displayed with the thinkorswim software.  I reduced the indicated gain or loss by $50 each week to account for commission costs and transaction costs (we typically buy back out-of-the-money expiring calls for $3 or so, or pay a small premium when rolling over in-the-money calls).  Of course, VIX was relatively high on this date (about 22), so the gains might be less if VIX were appreciably lower.

In 76% of the weeks, a gain would have been made and in 24% of the weeks, a loss would have resulted. In the gaining weeks, the average gain was $284 and the in the losing weeks, the average loss was $445.   On an average of once a year (1 week out of each 50), a greater-than-15% loss would have occurred if no adjustments were made.

The bottom line is most encouraging.  It says that the portfolio would earn 100% over two years if those positions were in place and no adjustments were made during the week.  In order to carry out a strategy of making no adjustments, however, we would have to be willing to tolerate a weekly loss of about $1400 once every year.  

Since about two weeks a year, very large weekly losses might occur (averaging about $1000), it seems best to slightly alter our goal of never having a losing month.  When we encounter one of these weeks, the other 3 weeks of the month might not always do well enough to cover that large a loss.  Our new goal will to never have a losing month as long as the stock does not fluctuate more than $7 in one week during the month.  The more important 3%-a-month goal will continue to be in place. 

The first month for the portfolio (up 5.1%) is certainly an encouraging start, especially with the volatility that we experienced during that time period.

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Posted in 10K Strategies, Monthly Options, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »

Why Owning Options Beats Owning Stock

Monday, February 6th, 2012

Two weeks ago, Apple announced blow-out earnings that pleased just about everyone who follows the stock.  Since that time, AAPL has soared by 9.2%.  Owners of the stock are celebrating.

Meanwhile, the actual options portfolio we carry out at Terry’s Tips increased in value by 42.5% over this same time period.  Options outperformed the stock by more than 4 times.

Today I will share with you the actual option positions we hold in this portfolio, and show the potential gains (or losses) that lie ahead.  This is an important report that I hope you will read carefully

Why Owning Options Beats Owning Stock

In April, 2010, we set up a $5000 portfolio to demonstrate that a well-designed options portfolio could substantially outperform the outright purchase of stock.  We selected AAPL as the underlying, a company we thought had a good future.

We never imagined that future would be quite as spectacular as it has been so far.  The stock has skyrocketed by 72% since then.  Meanwhile, our options portfolio has gone up by 263%.  Our subscribers who mirrored our portfolio from the very beginning have gained over 3.5 times as much as they would have if they had merely purchased shares of AAPL.

We withdrew $3000 of the original $5000 so new subscribers could mirror the portfolio with a smaller investment.  The original investment, now $2000, as grown to its present value of $12,141 in 21 months.  Not bad by any standards, if we do say so ourselves.

How did we do it?   Quite simply, we bought call options with a few months of remaining life and sold call options with only one month of remaining life against these positions. The shorter-term calls we sold to someone else decay at a faster rate than the longer-term calls that we own.  This gives us a major advantage over anyone who has just gone out and bought shares of stock.

In options terminology, we created a portfolio that maximized net delta (the equivalent number of shares of stock we own) as long as there was positive theta (which means that the portfolio would make a small gain every day that the stock remained absolutely flat).

Here are the actual positions of this report from our weekly report sent to paying subscribers:

If you spent $12,141 (the portfolio value) to buy stock, you could purchase 26 shares.  The net delta of this portfolio (117) means that we own the equivalent of 117 shares, or over 4 times as many as the stock owners control.  Meanwhile, theta ($32) means that we are collecting a sort of dividend of $32 every day that the stock remains flat.  We don’t actually get a check for that amount, but that is how much the portfolio should gain from the different decay rates of the long and short options in the portfolio.

Here is the risk profile graph which shows the gains (or losses) that this portfolio should experience when the current short options (Feb-12) expire on February 17, 2012 at the various possible stock prices.  (Note: If the stock moves sharply from its present level, we would make adjustments to the portfolio that would shift the curve in the direction the stock had moved.)

The graph shows that the portfolio should gain over 15% in two weeks if the stock remains absolutely flat or goes up by about $10.  Surely, this is a better place to be compared to what the stockholders have.  If the stock stays flat, they will not make anything.

If the stock falls about $5 in two weeks, the owners of stock would lose that amount while the portfolio should break even. If the stock falls about $10 in two weeks, the options portfolio would do just about the same as the owners of stock would do.  If it falls more than $10, the options portfolio would suffer a greater loss than the stock would, but we would have made an adjustment to reduce or eliminate that possible loss (by rolling down short calls to lower strike prices).

This may sound confusing, or maybe even too good to be true, but Terry’s Tips Insiders are generally not confused, and they know full well from experience that these results are real.   We feel that we have definitively proved that an options portfolio can significantly outperform the outright purchase of stock if you pick a stock that goes up.

Actually, we are a little confused why anyone who really believes in a particular stock would buy shares in it rather than setting up an options portfolio like this one.  Do you understand why?  Other than it taking a little more work?  Surely, learning a little about options is something that could pay off every year for the rest of your life.  Why not start off right now by clicking here?

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Posted in 10K Strategies, AAPL, Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »

Trading Rules for New 5%-a-Week Strategy

Tuesday, December 27th, 2011

Today I will list the trading rules for the new strategy that has made an average 6.4% gain every week since we set it up in early December.  

More importantly, we are repeating of our offer of becoming an Insider for the lowest price we have ever offered.

Trading Rules for New 5%-a-Week Strategy

Our goal is to make 5% a week.  Admittedly, that sounds a little extreme.  But we did it for the first 3 weeks we tried it in a real account.  In fact, we gained an average of 6.4% after commissions.  

We call it the STUDD Strategy.  STUDD stands for Short Term Under-Intrinsic Double Diagonal.  How’s that for a weird acronym?

Here are the Trading Rules:

1)    Purchase an equal number of deep in-the-money (5 – 8 strikes from the stock price) puts and calls for an expiration month which has 3 to 7 weeks of remaining life.

2)    At the same time, sell the same number of at-the-money or just out-of-the-money Weekly puts and calls.

3)    Make the above purchases and sales at a net price which is less than the intrinsic value of the long options. (Intrinsic value is the difference between the strike prices.  For example, we purchased IWM January-12 70 calls and 80 puts, and the intrinsic value of these two options will be at least $10 no matter where the stock ends up.  We paid a net $9.46 for the initial spreads, and as long as the short options are out of the money, the long options will eventually be worth at least their intrinsic value of $10).  Any out-of-the-money premium collected in subsequent weeks would be pure profit.

4)    During the week, if either of the short Weekly options become over $1 in the money, buy them back and replace them with another short option which is 2 strikes higher or lower (depending on which way the stock has moved).  Move both short Weekly options by 2 strikes in the same direction, one at a debit (buying a vertical spread) and one at a credit (selling a vertical spread).  The net amount that the two trades cost will reduce the potential maximum gain for the week.

5)    On the Friday when the Weeklys expire, buy back the short Weeklys and sell next-week Weeklys at the just out-of-the-money strike price for both puts and calls.

6)    On the Friday when the original monthly options are due to expire, close out all the positions and start the process over with new positions.
There will invariably be some variations to these trading rules.  For example, instead of selling just out-of-the-money Weekly options, we might sell some which are a dollar more than the just out-of-the-money strike.  We also might close out the original monthly options a week before the final Friday if they can be sold for appreciably more than the intrinsic price (the more the stock has moved during the month, the higher above the intrinsic value the options will be able to be sold for).

This all may seem a little confusing right now, but if you decide to make a serious investment in your financial future, it will all become clear as you can watch how an actual portfolio (or two) unfolds using these trading rules for the next two months as a Terry’s Tips Insider.

As our New Year’s gift to you, we are offering our service at the lowest price in the history of our company.  We have never before offered a discount of this magnitude.  If you ever considered becoming a Terry’s Tips Insider, this would be the absolutely best time to do it.  

So what’s the investment?  I’m suggesting that you spend a small amount to get a copy of my 70-page (electronic) White Paper, and devote some serious early-2012 hours studying the material.  

And now for the Special Offer – If you make this investment in yourself by midnight, December 31, 2011, this is what happens:

For a one-time fee of only $39.95, you receive the White Paper (which normally costs $79.95 by itself), which explains my two favorite option strategies in detail, 20 “Lazy Way” companies with a minimum 100% gain in 2 years, mathematically guaranteed, if the stock stays flat or goes up, plus the following services :

1) Two free months of the Terry’s Tips Stock Options Tutorial Program, (a $49.90 value).  This consists of 14 individual electronic tutorials delivered one each day for two weeks, and weekly Saturday Reports which provide timely Market Reports, discussion of option strategies, updates and commentaries on 8 different actual option portfolios, and much more. 

2) Emailed Trade Alerts. I will email you with any trades I make at the end of each trading day, so you can mirror them if you wish (or with our Premium Service, you will receive real-time Trade Alerts as they are made for even faster order placement or Auto-Trading with a broker).  These Trade Alerts cover all 8 portfolios we conduct.

3) If you choose to continue after two free months of the Options Tutorial Program, do nothing, and you’ll be billed at our discounted rate of $19.95 per month (rather than the regular $24.95 rate).

4) Access to the Insider’s Section of Terry’s Tips, where you will find many valuable articles about option trading, and several months of recent Saturday Reports and Trade Alerts.

5) 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 all of these benefits for only $39.95, less than the price of the White Paper alone. I have never made an offer anything like this in the eleven years I have published Terry’s Tips.  But you must order by midnight on December 31, 2011. Click here and enter Special Code 2012 (or 2012P for Premium Service – $79.95) in the box to the right.

Investing in yourself is the most responsible New Year’s Resolution you could make for 2012.  I feel confident that this offer could be the best investment you ever make in yourself.

Happy New Year!  I hope 2012 is your most prosperous ever.  I look forward to helping you get 2012 started right by sharing this valuable investment information with you. 

Terry

P.S.  If you would have any questions about this offer or Terry’s Tips, please call Seth Allen, our Senior Vice President at 800-803-4595.  Or make this investment in yourself at the lowest price ever offered in our 8 years of publication – only $39.95 for our entire package – http://www.terrystips.com/track.php?tag=2012&dest=programs-and-pricing using Special Code 2012 (or 2012P for Premium Service – $79.95).

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Posted in Lazy Way Strategy, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, STUDD Strategy: Short Term Under-Intrinsic Double Diagonal, Terry's Tips Portfolios | No Comments »

Update on 5% a Week “Conservative” Portfolio

Monday, December 19th, 2011

Last week was a bad one for the market.  The S&P 500 fell 3.5%.  Six of the 8 portfolios carried out at Terry’s Tips made gains last week. Once again, our subscribers where happy that they owned options rather than stock.

One of the two portoflios that lost money is not carried out with our basic strategy, but is a proxy for owning stock in AAPL (which fell over $12 last week, obviously causing a loss).

Our 10K Bear portfolio gained almost 10% for the week, and now has gone up over 70% since we started it 5 months ago (SPY has fallen 7.5% over that time period).  This portfolio continues to be a good hedge against other investments which do best when markets move higher.

Today I would like to update the report I sent out last week on a $1479 investment which we believe should make 5% a week.

Update on 5% a Week “Conservative” Portfolio:

Three weeks ago, we made the following trades in one of our portfolios as a demonstration of an option play that we believe will make at least 5% a week after paying all commissions.  At the time, SPY was trading just about $125:

Buy To Open 1 SPY Jan-12 132 put (SPY120121P132)
Sell To Open 1 SPY Dec2-11 125 put (SPY111209P125) for a debit of $6.98  (buying a diagonal)
 
Buy To Open 1 SPY Jan-12 118 call (SPY120121C118)
Sell To Open 1 SPY Dec2-11 125 call (SPY111209P125) for a debit of $7.05  (buying a diagonal)

These two spreads cost us a total of $1403 plus commissions of $5 (the commission rate for Terry’s Tips subscribers at thinkorswim).  It is an interesting option play because the deep in-the-money Jan-12 put and call together will be worth at least $1400 (their intrinsic value) when they expire on the third Friday in January (7 weeks after we made these trades).  Since we only paid $1408 for these options, as long as we don’t have to buy back any short options we might sell against them, we are guaranteed to collect at least $1400 when they expire in January.

An interesting additional feature of this portfolio is that if the stock manages to make a big move during the 7 or so weeks of the long options’ existence, the original long put and call might be able to be sold at the beginning of the final week for well more than their intrinsic value.  The closer to one of the original strike prices the stock becomes, the greater the additional time premium will be.  Of course, if the stock moves outside the original range (118 – 132), the total value would exceed the original intrinsic value of $14 (again, as long as the short options continue to be out of the money).

We will have 6 opportunities to sell Weekly puts and calls using the Jan-12 options as collateral for those sales.  Any money we collect from selling those options is pure profit (unless they end up in the money and we have to buy them back on the Friday that they expire).

Since the options we sold were both at the 125 strike price, one of them would have to be bought back on Friday, December 9th (unless SPY closed exactly at $125.00, an unlikely event). 

As we reported a week ago, the portfolio gained 6.2% after commissions in its first week, and we started out last week being short a Dec-11 SPY 127 call (which we had sold for $1.28 and a Dec-11 SPY 126 put (which we had sold for $1.99).  If we would be lucky enough for the stock to remain in the $126 – $127 range all week, the $324 we collected (after commissions) by selling these two options would be pure profit (a whopping 22% on our original investment in a single week).

The secret of success to this little strategy is in the adjustments that invariably need to be made because the stock usually doesn’t stay perfectly flat all week.  Last week was no exception.  SPY fell $4.46.  Ouch!

When SPY fell over $2, we bought back our short 126 put and sold a 123 put which also expired on Friday, December 16.  Buying this vertical spread cost us $181 after commissions, but our net cost was reduced by what we gained by selling a vertical spread on the short 127 call, replacing it with a short 124 call (this sale gained us $104 after commissions).  So we had now lost $77 of the potential maximum $324 gain for the week.

On Friday, we had to buy back the in-the-money 123 put, paying out $133, and we bought back the out-of-the-money 124 call for $1 (no commission charged at thinkorswim for this trade).  These trades reduced the potential maximum gain by $134. For the week, then, we gained $113, or 7.6% on the original investment of $1479 ($1408 plus an adjustment cost) three weeks earlier.

At the outset, we said that we expected this little investment would gain us an average of 5% a week, and we have exceeded that goal in each of the first two weeks.  Going into the third week, we have collected $127 from selling a 121 put which expires on December 23 and $142 from selling a 122 call which expires on that same day. 

If SPY ends up between $121 and $122 this Friday (and no adjustments become necessary), we could earn $269, or 18% on our original investment.  (At the end of the day last Friday, these two options were worth a total of $253, so we had already picked up a paper gain of $16).

Here is the risk profile graph for our positions, indicating the loss or gain next Friday at the various possible prices for SPY. Of course, if SPY fluctuates by $2, we would make an adjustment as we did this week, and hopefully turn a possible loss into a gain (as we did last week).

If you can follow the above trades, you have a good understanding how we carry out our portfolios at Terry’s Tips.  If this strategy can indeed make 5% a week (and there is the possibility of much more), we wonder why anyone would be buying stock or mutual funds rather than investing in an option strategy similar to this. 

Many of our subscribers are mirroring our trades in this portfolio (or having thinkorswim make the trades for them through their Auto-Trade service).  Last week they were all happy campers. 
___

Any questions?   I would love to hear from you by email (terry@terrystips.com), or if you would like to talk to our guy Seth, give him a jingle at 800-803-4595 and either ask him your question(s) or give him your thoughts.

You can see every trade made in 8 actual option portfolios conducted at Terry’s Tips and learn all about the wonderful world of options by subscribing here.   Why wait any longer to make this important investment in yourself?

I look forward to having you on board, and to prospering with you.

Terry

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Posted in 10K Strategies, AAPL, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios | No Comments »

A Smart Way to Hedge Your Investments (With Options)

Monday, November 28th, 2011

For the last month or so, the European debt crisis has crushed the U.S. stock market.  Will fears of a global melt-down continue to depress our markets, or will we enjoy a Santa Claus rally next month?

The answer is that no one really knows.  We can all wager a bet as to which way the market will go, but it really is no more than a guess.  We all know the market moves both ways, but we never know which way it will move next.

I believe that some of everyone’s investment portfolio should be in a hedge that protects against the market moving down.  Most people are quite eager to buy stocks or mutual funds, but very few set up a hedge in case they are wrong.  Today I would like to discuss exactly how that hedge might be set up.

A Smart Way to Hedge Your Investments (With Options)

Let’s say you have accumulated a nest egg of $25,000 which you have wisely placed most of it in an index fund (I say wise because index funds, over time, consistently outperform every other kind of mutual fund investment).

Now let’s assume that you are super-smart, and have decided to take $5000 (20% of your total investment portfolio) and placed it in an investment which will prosper if the market should fall.  In my opinion, that hedge should be an options portfolio much like an actual portfolio we carry out for Terry’s Tips subscribers.  We call it the 10K Bear.

Four weeks ago, the market (the S&P 500 tracking stock, SPY) was at $128.60.  Last Friday, SPY closed at $116.34, a drop of $12.26, or 9.5%.  Presumably, your index fund lost exactly that amount.  On your $20,000 investment, you have lost $1900 over those 4 weeks.

Now let’s check out how well your 10K Bear portfolio has held up.  Our actual portfolio (which many subscribers mirror on their own or have thinkorswim make the trades for them through their Auto-Trade program) gained 80% after commissions.  If you had invested $5000 (20% of your total investment portfolio) in the 10K Bear, you would have gained $4000 over those 4 weeks while the market tanked.

Bottom line, if you had invested 20% of your money in the 10K Bear and 80% of your money in an index fund, you would have a net gain of over 20% for the period rather than a loss of 9.5%.  In fact, if you had only put 10% of your funds in our bearish options portfolio, you would have broken even for the period rather than losing 9.5%.

Here is how the 10K Bear should perform this week (ending Friday, December 2).  The portfolio is currently worth $6730 but we will withdraw money again next week so that subscribers can mirror the portfolio with close to $5000:

The P/L Day column in the lower right-hand corner shows the expected gain if the stock closes as the Stk Price (left-hand corner column).  You can see that an average gain of about 13% will come if the stock stays flat or falls by as much as $3.  It can go $2 higher and a profit will still be made.  Only if the stock goes up by more than $2 ½ should a loss result (assuming no adjustments are made).

If the stock fluctuates more than $2 in either direction early in the week, we would probably make an adjustment which would shift the above curve in the direction that the stock has moved.  This adjustment would usually reduce the maximum possible gain for the week but would increase the chances that a good gain would result.  Above all, we do our best to avoid a loss of any amount.

How is this portfolio set up?  It consists of owning SPY puts which expire in January or February 2012 and selling Weekly puts (at lower strike prices) that expire this Friday, December 2nd.   If the stock holds steady, the decay rate of our Weekly puts is greater than our longer-term long puts, and the portfolio gains from the difference in decay rates.

If the stock falls, since the long puts are at higher strike prices, they increase in value at a greater rate than the short puts do, and even larger gains are possible.  If the stock falls too much, at some point the long and short put positions go up at essentially the same rate (and we would make an adjustment by rolling down some of our short puts to even lower strikes).

This may seem a little complicated to you right now, but it is a very simple strategy once you watch it unfold in the real world for a few weeks.  Many subscribers mirror our portfolio on their own until they have confidence that they understand it sufficiently to carry it out on their own (and we are delighted to have an ex-subscriber who is making big bucks and will say nice things about us).  

For an investment of only $79.95 (subscribe here), you can learn all the details of a hedge that could have turned the losses you incurred over the last month into gains which were twice as great as those losses. (This price includes weekly updates on the 10K Bear and 7 other portfolios for two months.)  Of course, that investment gets you a whole lot more than the details on this bearish hedge.  But even if there were nothing else, it is a huge bargain that you should be able to use for the rest of your life to increase your annual gains year after year (especially in those times when the market falls, as it will).

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Posted in 10K Strategies, Monthly Options, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »

Follow-Up on Last Week’s 10K Bear Portfolio

Monday, November 14th, 2011

Last week I discussed our 10K Bear portfolio, the one that is designed to do best when the market falls.  Today I would like to expand that discussion and report on how well the portfolio did last week when there was extreme volatility (SPY fell over 4% on Wednesday but managed a gain of about 1% for the week).

Once again, I hope you will spend a few minutes studying the graph below.  If you can see what will happen in the next few days (ending Friday, November 18th), you will have a much better understanding of why I believe that options offer more potential than just about any other investment you can make.

I hope you will make a 5-minute investment in yourself and study the graph carefully.

Follow-Up on Last Week’s 10K Bear Portfolio: 

Most people own stocks or mutual funds that do best when the market moves higher.  How do they make out when the market moves lower?  Presumably, their portfolio value goes down.  Maybe they don’t feel so badly because all of their friends have also suffered a loss as well.

But if you’re anything like me, you hate to lose money, even if all my friends are losing at the same time.

Doesn’t it make sense that some of your money should be invested in something that does best when the market moves lower?  It’s called hedging.  Hedge funds do it all the time.  They even have named themselves after the idea.

We have set up a portfolio that is designed to do to just that.  We call it the 10K Bear portfolio.  Many Terry’s Tips subscribers (myself included) duplicate the trades made in this portfolio in their own account through the Auto-Trade program at TD Ameritrade’s thinkorswim.  Others copy the trades on their own in their account.

The neat thing about this portfolio is that it can make gains even if the stock goes up.  How many investments make gains when the stock moves in the opposite direction that you are betting on?  Therein lies the magic of options trading.

Two weeks ago, the S&P 500 (“the market”), SPY, fell 2.4%.  Our 10K Bear portfolio gained a whopping 24% for the week.  Last week, SPY rose $1.18, about 1%, and our portfolio gained 5.8%.  I call that having your cake and eating it too. 

Obviously, this portfolio does not make money every single week, regardless of what the market does.  But it almost always makes gains if the market stays flat or falls moderately, and also can make smaller gains if the market moves just slightly higher.  At the beginning of each week, we create a risk profile graph like the one below so we know exactly how the portfolio will perform at the various stock prices where it might end up on Friday.

The 10K Bear is a portfolio currently worth about $4200.  We own puts at several different strike prices (between $124 and $128).  These puts will expire on the third Friday in January of 2012.  Against these long puts we have sold Weekly puts which will expire on November 18, 2011.  These Weekly puts are at lower strike prices (from $122 to $126).

The Weekly puts that we have sold have higher decay rates than the January puts that we own (all options fall in value, or decay, every day the underlying stock remains flat).  This means that every day that the market does not fluctuate, our portfolio value grows larger.   That is the neat thing about a properly-designed options portfolio.  You can make gains even if you are wrong.  When you buy stock, the only way you make money is if the stock moves higher.  With options, you can make substantial gains even if the market stays absolutely flat (or moves moderately either up or down).

Here is the risk profile graph for our 10K Bear portfolio.  It shows how much the portfolio will gain or lose at the possible ending stock prices this Friday.

The second column from the right (under P/L Day) gives the dollar loss or gain at the three selected prices in the first column (Stk Price), and you can estimate the losses or gains from the graph curve at other possible stock prices.  At last Friday’s close, SPY was trading at $126.66.

You can see that if the stock is absolutely the same at the close next Friday, the portfolio will gain $470, or just over 10%.  If the stock falls moderately, by $2, and ends up at $124.66, the gain should be $970, or about 20%.  (Both these numbers will be reduced slightly from commissions and trading costs when the Weeklys are bought back next Friday and replaced with Weeklys that expire on November 25th.)

The stock can go up as high as $128 before a loss should result.  In other words, the portfolio makes excellent money if the stock stays flat, even more money if the market falls moderately, and it also can gain if the market goes up (as long as the rise is not too great).

Where else can you invest your money and expect these kinds of returns?  If you know of anything that can offer even remotely as great as these gains, please send the details along to me.  If you like, I would share them with my subscribers so we all could benefit.

Why are you waiting any longer before you learn the details of how you can start making money using the 10K Strategy that is the basis of the 8 actual portfolios that we carry out (and you can easily duplicate in your own account, either on your own or through the Auto-Trade program at thinkorswim)?

Give yourself (and your loved ones) an early Christmas gift, and increase your earning potential exponentially by subscribing today.  Do it right here.

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Posted in 10K Strategies, Monthly Options, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | No Comments »

A Bearish Option Portfolio That Can Gain Even if the Market Doesn’t Fall

Monday, November 7th, 2011

Where should you place your investment dollars in this time of uncertainty?  There are no easy answers. 

The stock market is not an comfortable place to be.  Through the first ten months of 2011 (in what many have considered to be a good year for the market), it has gained about 2%.  It is lower today than it was three years ago.  Bonds do not yield enough to make much of a difference, and CD rates are pathetic.  Foreign stocks have not done appreciably better than domestic stocks.  And real estate has been a great way to lose money big time.

I believe that our SPY portfolios offer greater potential for monetary returns than any investment alternative out there.  (SPY is the tracking stock for the S&P 500 stock index, so you are trading on the entire market rather than an individual stock.)

Today I would like to share with you the risk profile graph of one of our SPY portfolios – this one is called the 10K Bear.  It is positioned to do best if the market falls.  It can serve as a hedge against your other investments which presumably do best if the market moves higher.

I hope you will spend a few minutes studying the graph below.  If you can see what will happen in the next few days (ending Friday, November 11th), you will have a much better understanding of why I believe that options offer more potential than just about any other investment you can make.

I hope you will make a 5-minute investment in yourself and study the graph carefully.

A Bearish Option Portfolio That Can Gain Even if the Market Doesn’t Fall:

 
The 10K Bear is a portfolio currently worth about $4000.  We own puts at several different strike prices (between $124 and $128).  These puts will expire on the third Friday in January of 2012.  Against these long puts we have sold Weekly puts which will expire on November 11, 2011.  These Weekly puts are at lower strike prices (from $121 to $125).

The Weekly puts that we have sold have higher decay rates than the January puts that we own (all options fall in value, or decay, every day the underlying stock remains flat).  This means that every day that the market does not fluctuate, our portfolio value grows larger.   That is the neat thing about a properly-designed options portfolio.  You can make gains even if you are wrong.  When you buy stock, the only way you make money is if the stock moves higher.  With options, you can make substantial gains even if the market stays absolutely flat (or moves moderately either up or down).

Here is the risk profile graph for our 10K Bear portfolio.  It shows how much the portfolio will gain or lose at the possible ending stock prices this Friday.

The second column from the right (under P/L Day) gives the dollar loss or gain at the three selected prices in the first column (Stk Price), and you can estimate the losses or gains from the graph curve at other possible stock prices.  At last Friday’s close, SPY was trading at $125.75.

You can see that if the stock is absolutely the same at the close next Friday, the portfolio will gain $901, or about 22% on the $4000 portfolio value.  If the stock falls moderately, by $2, and ends up at $123.75, the gain should be $1,337, or about 33%.  (Both these numbers will be reduced slightly from commissions and trading costs when the Weeklys are bought back next Friday and replaced with Weeklys that expire on November 18th.)

The stock can go up as high as $129 before a loss should result.  In other words, the portfolio makes excellent money if the stock stays flat, even more money if the market falls moderately, and it also can gain if the market goes up (as long as the rise is not too great).

Where else can you invest your money and expect these kinds of returns?  If you know of anything that can offer even remotely as great as these gains, please send the details along to me.  If you like, I would share them with my subscribers so we all could benefit.

Last week, the market was weak.  SPY fell $3.12.  Our 10K Bear portfolio gained 24% (after commissions and roll-over costs).  That is more than most stock investments make in several years.  We did it in a single week.

Why are you waiting any longer before you learn the details of how you can start making money using the 10K Strategy that is the basis of the 8 actual portfolios that we carry out (and you can easily duplicate in your own account, either on your own or through the Auto-Trade program at thinkorswim)?

Give yourself (and your loved ones) an early Christmas gift, and increase your earning potential exponentially by subscribing today.  Do it right here.

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Posted in 10K Strategies, Monthly Options, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options | 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%.  

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 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. 

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.

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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 »

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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.

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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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