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Posts Tagged ‘shoot strategy’

How to Own 100 Shares of Google for $16,000

Monday, October 7th, 2013

Way back when Google (GOOG) went public at $80 a share, I decided that I would like to own 100 shares and hang on to it for the long run. Obviously, that was a good idea as the stock is trading today at $870. My $8000 investment would now be worth $87,000 if I had been able to keep my original shares. Unfortunately, over the years, an options opportunity inevitably came along that looked more attractive to me than my 100 shares of GOOG, and I sold my shares to take advantage of the opportunity.

Many times my investment account had compiled a little spare cash, and I went back into the market and bought more shares of GOOG, always paying a little more to buy it back. At some point it felt like I just had too much money tied up in it. An $8000 commitment is one thing, but $87,000 is real money.

Today I would like to share how I own the equivalent of 100 shares of GOOG for an investment of only $17,000, and the neat thing about my investment is that I get expect to get a “dividend” in the next two weeks of about $1300 if the stock just sits there and doesn’t go anywhere.

I own options, of course. Here is what I own.

Terry

 How to Own 100 Shares of Google for $16,000:  You would have to shell out about $87,000 today to buy 100 shares of GOOG stock. If you bought it on margin, you might have to come up with about half that amount, $43,500, but you have to shell out interest on the margin loan each month. I like money coming in, not going out.

A couple of weeks in this newsletter we talked about the Greek measure delta. This is simple the equivalent number of shares of stock that an option has. I own GOOG 800 calls that expire on the third Friday of January 2014. You could buy one today for $8600. I own 2 of them for a cost of about $17,200.

The delta for these Jan-14 800 calls is 75. That means if the stock goes up by a dollar, the value of each of my options will go up by $75. With these 2 options I own the equivalent of 150 shares of stock.

Since all options decline a little bit every day that the stock stays flat (it is called decay), simply owning options is just about as bad as paying margin interest on a stock loan. As I said earlier, I like money coming in rather than going out.

Since I own 2 call options at a lower strike price that the market price I am entitled to use them as collateral to sell someone else the opportunity to buy shares of GOOG at a higher price. I sold one Oct-13 890 call, collecting $13.50 ($1350) at today’s price. This option will expire in two weeks (October 18). If the stock is at any price less than $890, this call will expire worthless and I will get to keep the entire $1350.

This Oct-13 890 call option that I sold carries a delta of 38, making my net option value 112 deltas (the equivalent of 112 shares of stock).

Since I am aiming to own 100 shares of GOOG, I sold another Oct-13 call, this one at the 935 strike. At today’s prices, this one would go for $3.50 ($350). The delta on this call is 13, reducing my net delta value to exactly 100.

I now own the equivalent of 100 shares of GOOG at a cost of $17,200 less the $1700 I collected from selling the two calls, or $15,500.

The neat thing about my option positions is that if the stock doesn’t go up (as I hope it will), my disappointment will be soothed a bit because I will gain about $1300 over the next two weeks. Here is the risk profile graph for my positions:

Google Risk Profile Graph

Google Risk Profile Graph

The P/L Day column in the lower right-hand corner shows what the gain or loss will be at the price in the first column on the left. (The stock popped up about $3 while I was writing this Monday morning so it is no longer trading at $870 as it was when I started).

There are two disadvantages to owing the options I do rather than the stock. If the stock falls 10%, I will lose about $9800. If I owned 100 shares of stock, I would lose only $8700. On the other hand, if the stock goes up by 10% in the next two weeks, I would only gain $7100 vs. the $8700 I would make if I owned the stock. I don’t think the stock will move by anywhere near these amounts in the next two weeks, so I am content to live with the slightly less I might gain (or the slightly more I would lose) at these extremes.

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).

How We Made 613% With Apple Options In 7 Weeks And Expect To Do It Again In 4 Months

Monday, September 17th, 2012

The Apple portfolio has now made 613% over the last 7 weeks and today I would like to tell you more about it, including every current position that it has.

How We Made 613% With Apple Options In 7 Weeks And Expect To Do It Again In 4 Months

Here’s the linkHow We Did It

To accommodate those folks who signed up for our free newsletter after Labor Day because of the Seeking Alpha article, we are extending the special offer we made last week for an extra week.

The Special Offer – To Celebrate the re-establishment of Auto-Trade at TD Ameritrade/thinkorswim, we are offering our Premium service at the lowest price in the history of our company.  We have never before offered such a large discount for the Premium Service.  If you ever considered becoming a Terry’s Tips Insider, this would be the absolute best time to do it.

And now for the Special Offer – If you make this investment in yourself by midnight, September 18, 2012, this is what happens:

1)    For a one-time fee of only $75.95, you receive the White Paper (which normally costs $79.95 by itself), which explains my 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:
 
2)    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. 

3)    Emailed Trade Alerts.  I will email you with any trades I make before I make them so you can mirror them yourself or have them executed for you by TD Ameritrade/thinkorswim through their Auto-Trade program. These Trade Alerts cover all 8 portfolios we conduct.

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 copy of my e-book, Making 36%: Duffer’s Guide to Breaking Par in the Market Every Year, In Good Years and Bad (2012 Updated Version).

With this one-time offer, you will receive all of these Premium Service benefits for only $75.95, (normal price $119.95). 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 September 18, 2012. Click here and enter Special Code Auto12 in the box located on the right side of your screen.

I feel confident that this offer could be the best investment you ever make in yourself.  Celebrate the resumption of Auto-Trade at TD Ameritrade/thinkorswim with us.  But do it before the September 18th, as this offer will not be available after that day.

I look forward to prospering 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 11 years of publication – only $75.95 for our entire package (regular price $119.95). Click here and use Special Code Auto12.

A Calendar Spread Strategy to Capitalize on Apple’s Expected Announcement Next Wednesday

Monday, September 10th, 2012

This week is an unusual one for the Idea of the Week.  For the second week in a row, this newsletter supplies a link to that report. (My apologies if you came on board because of the earlier article.

Enjoy the report, and the report inside the article which documents every trade we made in an actual portfolio that gained us 452% after commissions in six weeks this summer.

A Calendar Spread Strategy to Capitalize on Apple’s Expected Announcement Next Wednesday

Here’s the linkA Calendar Spread Strategy

To accommodate those folks who signed up for our free newsletter after Labor Day because of the Seeking Alpha article, we are extending the special offer we made last week for an extra week.

The Special Offer – To Celebrate the re-establishment of Auto-Trade at TD Ameritrade/thinkorswim, we are offering our Premium service at the lowest price in the history of our company.  We have never before offered such a large discount for the Premium Service.  If you ever considered becoming a Terry’s Tips Insider, this would be the absolute best time to do it.

And now for the Special Offer – If you make this investment in yourself by midnight, September 11, 2012, this is what happens:

1)    For a one-time fee of only $75.95, you receive the White Paper (which normally costs $79.95 by itself), which explains my 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:
 
2)    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. 

3)    Emailed Trade Alerts.  I will email you with any trades I make before I make them so you can mirror them yourself or have them executed for you by TD Ameritrade/thinkorswim through their Auto-Trade program. These Trade Alerts cover all 8 portfolios we conduct.

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 copy of my e-book, Making 36%: Duffer’s Guide to Breaking Par in the Market Every Year, In Good Years and Bad (2012 Updated Version).

With this one-time offer, you will receive all of these Premium Service benefits for only $75.95, (normal price $119.95). 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 September 11, 2012. Click here and enter Special Code Auto12 in the box located on the right side of your screen.

I feel confident that this offer could be the best investment you ever make in yourself.  Celebrate the resumption of Auto-Trade at TD Ameritrade/thinkorswim with us.  But do it before the September 11th, as this offer will not be available after that day.

I look forward to prospering 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 11 years of publication – only $75.95 for our entire package (regular price $119.95). Click here and use Special Code Auto12.

Two Strategies For Making Extraordinary Returns With Apple Options

Tuesday, September 4th, 2012

This week is an unusual one for the Idea of the Week.  For the first time ever, I submitted an article to Seeking Alpha, and this newsletter supplies a link to that report. (My apologies if you came on board because of this article – our regular Idea of the Week will resume next Monday.)

Enjoy the report, and the report inside the article which documents every trade we made in an actual portfolio that gained us 357% after commissions in four weeks this summer.

Two Strategies For Making Extraordinary Returns With Apple Options

Here’s the linkTwo Strategies

To accommodate those folks who signed up for our free newsletter after Labor Day because of the Seeking Alpha article, we are extending the special offer we made last week for an extra week.

The Special Offer – To Celebrate the re-establishment of Auto-Trade at TD Ameritrade/thinkorswim, we are offering our Premium service at the lowest price in the history of our company.  We have never before offered such a large discount for the Premium Service.  If you ever considered becoming a Terry’s Tips Insider, this would be the absolute best time to do it.

And now for the Special Offer – If you make this investment in yourself by midnight, September 11, 2012, this is what happens:

1)    For a one-time fee of only $75.95, you receive the White Paper (which normally costs $79.95 by itself), which explains my 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:
 
2)    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. 

3)    Emailed Trade Alerts.  I will email you with any trades I make before I make them so you can mirror them yourself or have them executed for you by TD Ameritrade/thinkorswim through their Auto-Trade program. These Trade Alerts cover all 8 portfolios we conduct.

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 copy of my e-book, Making 36%: Duffer’s Guide to Breaking Par in the Market Every Year, In Good Years and Bad (2012 Updated Version).

With this one-time offer, you will receive all of these Premium Service benefits for only $75.95, (normal price $119.95). 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 September 11, 2012. Click here and enter Special Code Auto12 in the box located on the right side of your screen.

I feel confident that this offer could be the best investment you ever make in yourself.  Celebrate the resumption of Auto-Trade at TD Ameritrade/thinkorswim with us.  But do it before the September 11th, as this offer will not be available after that day.

I look forward to prospering 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 11 years of publication – only $75.95 for our entire package (regular price $119.95). Click here and use Special Code Auto12.

Another AAPL Spread Idea

Monday, March 26th, 2012

Last week I suggested buying a SPY Weekly strangle to take advantage of the unusually low option prices that exist today.  Last Monday, I bought a Mar4-12 141 call and 140 call for $1.09 ($111.50 including commissions).  For the first three days, the stock did not budge beyond the $1.50 in either direction that I needed to make a profit on the trade.  Finally, on Thursday it fell enough so that I could at least break even so I placed an order to sell the strangle for $1.14 which executed, exactly covering my cost after commission.  If the stock had fallen that much earlier in the week, I would have held off selling it in hopes of a nice profit.  But I was happy with a break-even trade in a very quiet week.  I plan to place a similar strangle buy on Monday (today).

You may be bored from hearing about another AAPL trade.  But here is another one this week.  Terry’s Tips carries out two option portfolios that use AAPL as the underlying.  Last week was a quiet week for AAPL.  It went up only 1.8%.  Both of our actual portfolios gained over 23% after commissions for the week.  We don’t think that is boring.  Most investors would be happy with that size gain for two years, not seven days.

One of our AAPL portfolios has been running for just under two years, and has gained just shy of 700% while the stock doubled in value.  So we are partial to this stock.

Today I will discuss an AAPL option play that is similar to one in one of our actual portfolios.

Another AAPL Spread Idea

AAPL option prices are high compared to historical levels.  Since there is an earnings announcement coming late in April, option prices tend to move higher.  The stock also tends to move higher in advance of earnings announcements.  So we set up the following portfolio with a slightly bullish stance. 

To keep it simple, with AAPL trading at $596 where it closed Friday we will buy three calendar spreads.  We will buy the Apr-12 options (which expire April 21, 2012) and sell the same-strike Mar5-12 options which expire on Friday, March 30, 2012. 

We will buy one calendar spread using puts at the 595 strike, and one calendar spread using calls at both the 600 and 605 strikes.  These spreads will cost an average of about $11.25 ($1125 plus a commission of $2.50 which is what thinkorswim charges Terry’s Tips subscribers).  So the total investment will be about $3500, and we set aside another $1200 or so in case we need to add another similar spread this week at a higher or lower strike price (based on which way the stock moves).

This what the risk profile graph shows for the above three calendar spreads:

The P/L Day column in the lower right-hand corner shows the expected gain if the stock remains at $596 or goes up or down by $10 during the week.  You can see that there should be a gain if the stock ends up within a range from about $585 to $612.  If the stock stays about flat or goes up by $10, we could make as much as 25% on our investment in five short days.  If it moves by a much larger amount we could lose money, however.

If AAPL moves about $5 higher or lower before we buy these spreads on Monday, we would raise or lower the strike prices we used by that amount, using puts for spreads at strikes below the stock price and calls for strikes which are higher than the stock price.

If, during the week, the stock moves by $10 in either direction, we would use the cash we set aside to buy another calendar spread using the same option series at either the 620 strike (using calls) if the stock has gone up by $10 or at the 580 strike (using puts) if the stock has fallen by $10.  The additional spread would provide some protection against a loss if the stock continued to move in the same direction.

If you think AAPL is headed higher next week you would start out with spreads at higher strike prices than we have used in our sample, and vice versa.  We take the position that we really don’t know which way it is headed, but we know from experience that the weeks leading up to an earnings announcement are usually up weeks, so we have set up spreads which make about as large a gain if the stock goes up by $10 as they do if the stock remains flat.

Happy trading if you choose to duplicate our positions.  Of course, you should never risk money that you can’t afford to lose.

We have made 3 short videos which explain the 3-week results of our AAPL trading. The original positions were set out in an actual account carried out at Terry’s Tips.  The YouTube link is http://youtu.be/6J9KPuimyXk

The portfolio was updated in the Week 2 video -
http://youtu.be/e0B7_6e_5AE 

And finally, adjustment trades we made were displayed in this little video –
http://youtu.be/YC3d2NuX2MI  Be sure to enlarge it to full-screen mode so you can see the numbers. 

Lessons Learned Around the Apple New Product Announcement

Monday, March 12th, 2012

Three weeks ago, we set up a special portfolio with a goal to make 100% on AAPL options in 4 weeks.  We closed out the positions last Friday, a week early.  We failed to reach our goal.  The portfolio started out with a value of $4488 and after 3 weeks, it was worth $7172.

The gain for the 3 weeks was 60% (after commissions).  Even though we failed in our initial goal, most of us were happy with making 60% in less than a month on our money.

For two years, Terry’s Tips has carried out at least one portfolio (and sometimes two) which use AAPL as the underlying, and we have noticed some patterns of stock price actions and option values that I would like to share with you today.

Lessons Learned Around the Apple New Product Announcement

AAPL has been a great underlying stock for Terry’s Tips subscribers.  In April, 2010 (just under two years ago), we set up an actual brokerage account to trade options on AAPL.  We started with $5000 in the account. 

We maintained a bullish position in this portfolio because we liked the prospects for this company.  Actually, it performed quite a bit better than we expected.  Over the two years, whenever the portfolio value grew to over $10,000, we withdrew cash from it so that new Terry’s Tips subscribers who wanted to mirror the portfolio in their own account (or have trades made for them through the Auto-trade program at thinkorswim) could get started with $10,000.

A total of $13,000 was withdrawn from the portfolio over two years, and the account today is still worth more than $10,000, or double what subscribers started with.  It works out to a gain of about 565% over the period.

We learned some things along the way.  First, in the few weeks leading up to an announcement of earnings or a new product release, the stock tended to move higher.  Once the announcement was made, the stock usually fell back a bit (market expectations seem to be greater than the reality). 

There is an old saw in the market – “buy on the rumor and sell on the news,” and it seemed to prevail after the Apple announcements most of the time.

Last week, we expected a similar pattern once the news about the new iPad was announced.  We added new spreads to our portfolio to provide downside protection in case the pattern continued (we bought new calendar spreads at strike prices well below the current price of the stock).  These spreads ultimately lost money when the stock did not fall this time around.  At one point shortly after the announcement, it did fall by almost $30 but quickly reversed itself.

In spite of this experience, we expect that in future AAPL announcements, such as the quarterly earnings announcement due near the end of April, we plan to add downside protection once again.

The second big pattern we noticed concerned the option prices around announcement time.  Leading up to the announcement, option prices soared.  The implied volatility of the March options got up to 40, and fell all the way to 25 after the announcement.  In the experimental portfolio we started with $4488, we had used Weekly Mar2-12 as the long side, and these prices collapsed after the announcement.  The portfolio lost money for the week.

In our other AAPL portfolio, the one we have been running for almost 2 years, our long positions were in further-out months, and these option prices did not collapse.  As a result, this portfolio gained 11% for the week (even though we had placed some downside protection spreads in it as well).

In future announcement periods, we intend to use longer-term call options as the long side to avoid the collapse of shorter-term option prices once the announcement has been made, even though those options are quite a bit more costly.

We have made 3 short videos which explain the 3-week results of the special shorter-term portfolio (which we have now closed down and replaced with a new set of AAPL options).  If you have not already seen these videos, you might check them out.

The original positions were set out in an actual account carried out at Terry’s Tips.  The YouTube link is http://youtu.be/6J9KPuimyXk

The portfolio was updated in the Week 2 video -
http://youtu.be/e0B7_6e_5AE 

And finally, adjustment trades we made were displayed in this little video –
http://youtu.be/YC3d2NuX2MI  Be sure to enlarge it to full-screen mode so you can see the numbers. 
_ _ _
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 (including the two AAPL-based portfolios) 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

 

Making Adjustments When the Stock is Moving Strongly Higher

Monday, March 5th, 2012

Greetings!

A little over two weeks ago, we set out with a goal to make 100% on our AAPL options in 4 weeks.  We started with calendar spreads at several different strike prices, one below the stock price and most of them at higher strikes.

We thought we could double our money in 4 weeks if the stock would hold steady or move moderately higher.  As you may know, it overachieved this goal and rose over $20 in each of the first two weeks.

Today we will discuss the adjustments we had to make to keep up with the skyrocketing stock.

By the way, in spite of the stock moving much higher than we would have liked, we have gained 78% (after commissions) on our actual portfolio over the past two weeks, about 9 times as great as the increase in the stock price.

Next week, we will disclose the actual positions we will set up in an effort to duplicate this performance in the next 4 weeks.  Stay tuned.

Terry

Making Adjustments When the Stock is Moving Strongly Higher

As AAPL chugged steadily higher, our calendar spreads (all in calls) so became all in the money (i.e., at strike prices which were lower than the stock price).  Since we were betting that the stock would stay flat or rise moderately, we needed to buy back our lowest-strike short calls and replace them with higher-strike short calls.  Each such trade required us to put up a little extra cash because the calls we were buying back cost more than the premium we received from selling new higher-strike calls.

When our cash reserve was used up, we had to take off (sell) some of our positions, once again buying back our lowest-strike short calls, but this time selling our lowest-strike long calls and using the cash to buy new calendar spreads at higher strike prices.

I know that this all sounds complicated, and is a lot of work, but we think it is worth if a 78% gain in two weeks is one of the rewards.

The actual adjustment trades we made last week at displayed in this little video –
http://youtu.be/YC3d2NuX2MI  Be sure to enlarge it to full-screen mode so you can see the numbers. 

Two weeks ago, the original positions were set out in an actual account carried out at Terry’s Tips.  The YouTube link is http://youtu.be/6J9KPuimyXk

Last week, the portfolio was updated in the Week 2 video -
http://youtu.be/e0B7_6e_5AE 

Again, switching to full-screen mode is advised.

 

Making Adjustments to the Shoot Strategy

Monday, February 13th, 2012

Greetings!

Last week I shared the actual positions we held in what we call our Shoot Strategy portfolio (which uses AAPL as the underlying).  Last week was a great one for AAPL. The stock rose 7.3%.  Our portfolio gained 22.1% after commissions, or more than 3 times the amount the stock went up.

One of the potential problems of the options portfolio is that the stock goes up too fast.  When that appears to be happening, as it did in Apple last week, adjustments need to be made.  We will talk a little about those adjustments this week.

Terry

Making Adjustments to the Shoot Strategy

First, let’s repeat the table of the actual positions we started with at the beginning of last week:

You can see that all of the short calls (at the 460, 465, and 470 strike prices were out of the money at the beginning of the week (i.e., at higher numbers than the stock price).

Early in the week, the stock started moving higher, and the 460 short call became well in the money, so we needed to make an adjustment.  This is the first move we made:

Buy-To-Close 1 AAPL Feb-12 460 call (AAPL120218C460)Sell-To-Open 1 AAPL Feb-12 470 call (AAPL120218C470) for a debit of $4.84  (buying a vertical)

This trade used up most of the $519 we had in the portfolio.  When the stock continued higher, we needed to adjust once again.  This is the Trade Alert we issued on Tuesday:

“We are in a position where we would make less if the stock goes up than if it stays flat, so we should roll to some higher strikes: 

Buy-To-Close 1 AAPL Feb-12 460 call (AAPL120218C460)
Sell-To-Close 1 AAPL Apr-12 430 call (AAPL120421C430) for a credit of $33.20  (selling a diagonal)
 

Buy-To-Open 1 AAPL Apr-12 470 call (AAPL120421C470)
Sell-To-Open 1 AAPL Feb-12 470 call (AAPL120218C470) for a debit of $13.30  (buying a calendar) 

Buy-To-Open 1 AAPL May-12 475 call (AAPL120519C475)
Sell-To-Open 1 AAPL Feb-12 475 call (AAPL120218C475) for a debit of $17.93  (buying a calendar)”

The first trade generated a large stash of cash (about $3300) which we used to buy two new calendar spreads at the 470 and 475 strike prices.  The stock continued to climb, and we had to adjust again on Wednesday.  This is the Trade Alert we issued on that day:

“Once again we have a short call which is too far in the money:
 
Buy-To-Close 1 AAPL Feb-12 465 call (AAPL120218C465)
Sell-To-Close 1 AAPL Apr-12 455 call (AAPL120421C455) for a credit of $19.55  (selling a diagonal)
 
Buy-To-Open 1 AAPL May-12 480 call (AAPL120519C480)
Sell-To-Open 1 AAPL Feb-12 480 call (AAPL120218C480) for a debit of $19.30  (buying a calendar)”

We sold our deepest in-the-money Apr-12 call as we bought back the lowest-strike Feb-12 short call and used the proceeds to buy a calendar spread (going all the way out to May) at the 480 strike.  The stock continued to move higher, and we had to adjust once again on Thursday.  This is the Trade Alert we issued on that day:

“It is not easy to keep up with the rising stock price: 

Buy-To-Close 1 AAPL Feb-12 470 call (AAPL120218C470)
Sell-To-Close 1 AAPL Apr-12 455 call (AAPL120421C455) for a credit of $23.10  (selling a diagonal)

Buy-To-Close 1 AAPL Feb-12 470 call (AAPL120218C470)
Sell-To-Open 1 AAPL Feb-12 485 call (AAPL120218C485) for a debit of $9.45  (buying a vertical)
 

Buy-To-Close 1 AAPL Feb-12 470 call (AAPL120218C470)
Sell-To-Open 1 AAPL Feb-12 490 call (AAPL120218C490) for a debit of $11.55  (buying a vertical) 

Buy-To-Close 1 AAPL Feb-12 475 call (AAPL120218C475)
Sell-To-Open 1 AAPL Mar-12 495 call (AAPL120317C495) for a debit of $2.05  (selling a diagonal)”

The first trade took off another Apr-12 call and we used the cash to buy two vertical spreads, rolling our short calls to a higher strike.  We did not have enough cash to make a third vertical spread purchase, so we sold a diagonal, trading the Feb-12 475 short call for a Mar-12 495 call.  Again, moving our short calls to higher strikes to keep up with the surging stock.

The stock continued higher, and we issued a second Trade Alert on Thursday:

“We have 3 short calls at the 480 strike that we should buy back: 

Buy-To-Close 1 AAPL Feb-12 480 call (AAPL120218C480)
Sell-To-Close 1 AAPL Apr-12 460 call (AAPL120421C460) for a credit of $27.00  (selling a diagonal) 

Buy-To-Close 2 AAPL Mar-12 480 calls (AAPL120317C480)
Sell-To-Open 2 AAPL Mar-12 500 calls (AAPL120317C500) for a debit of $9.10  (buying a vertical)”

The first trade was designed to generate sufficient cash to be able to buy two vertical spreads, rolling up the short Mar-12 480 calls to the 500 strike.  And the stock continued higher, necessitating the third Trade Alert for Thursday:

“We have enough cash to roll one in-the-money short call higher:

Buy-To-Close 1 AAPL Feb-12 485 call (AAPL120218C485)
Sell-To-Close 1 AAPL Feb-12 500 call (AAPL120218C500) for a debit of $8.10  (buying a vertical)”

Admittedly, there is a lot more work involved with adjusting the option portfolio than there is just owning the stock.  That is why most of our subscribers who mirror this and our other 7 portfolios sign up for the Auto-Trade program at thinkorswim and have all the trades made automatically for them (there is no charge for this service at thinkorswim other than the commissions, which are also only $1.25 per contract for Terry’s Tips subscribers).

Was it worth all this effort?  It was a magnificent week for AAPL owners.  The stock soared 7.3%.  Lots of smiling faces all around.  Meanwhile, our options portfolio gained 22.1% after commissions, or more than 3 times the gain made by the owners of the stock.  At the close Friday, our portfolio had grown from $12,141 to $14,829 in a single week.  Since we started this portfolio with $5000 some 20 months ago (we withdrew $2000 along the way), AAPL has gained 85% while our portfolio has done 3.7 times as well, gaining 317%.

We think this extraordinary better performance is worth the extra effort we have to put in. Investors who owned the stock over this time period would have seen their $5000 grow to $9250 while our options portfolio has grown to $16,829.  Stock owners would have gained $4250 while we gained $11,829.

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?  
_ _ _
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 (including William Tell) 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

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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