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Posts Tagged ‘Vertical Put Spread’

Consider Five Below Inc (FIVE) After The Bullish Technical Breakout

Monday, October 16th, 2017

This week we are featuring another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our portfolios to identify outperforming stocks and place spreads that take advantage of the momentum.

The composite average gain for the 10 portfolios carried out for Terry’s Tips  paying subscribers has now reached 95.2% for 2017.  Isn’t it time for you to come on board and learn exactly how our options strategies have been able to compile this kind of record so consistently this year?

Terry

Consider Five Below Inc (FIVE) After The Bullish Technical Breakout

Several analysts have been praising Five Below Inc’s business model and see further upside in the stock price.  Here are two of them – Five Below Might Offer 15% Upside Potential and Amazon Who? This Fast-Growing, Teen-Focused Retailer Breaks Out.

Recently, there has been a technical breakout in FIVE as it has scaled above the 2016 and 2017 highs which were in close proximity of each other around the $53 price point.  The stock has also climbed above a horizontal level at $54.77 which was major resistance in 2013, in doing so, the stock briefly traded at record levels.  There has been a retracement in the past week which could be offering an attractive entry point.

 

FIVE Chart October 2017

FIVE Chart October 2017

*source Tradingview.com

If you agree there’s further upside ahead for FIVE, consider this trade which is a bet that the stock will continue to advance, or at least not decline very much over the next four weeks.

Buy To Open FIVE 17Nov17 50 Puts (FIVE171117P50)
Sell To Open FIVE 17Nov17 55 Puts (FIVE171117P55) for a credit of $1.28 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when FIVE was trading near $55.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

If you use our favorite broker for this trade, tastyworks, your commission on this trade will only be $1 per opening contract ($2 per spread) (and there is no commission on closing trades, only the $.10 clearing fee).  Each contract would then yield $126 and your broker would charge a $500 maintenance fee, making your investment $374 ($500 – $126).  If FIVE closes at any price above $55 on November 17, 2017, both options would expire worthless, and your return on the spread would be 34% (384% annualized).

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

IBD Underlying Updates October 12, 2017

IBD Underlying Updates October 12, 2017

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Earnings Growth To Fuel Further Momentum For Red Hat (RHT)

Monday, October 2nd, 2017

This week we are featuring a recent addition to the Investor’s Business Daily (IBD) Top 50 List of companies.  We use this list in one of our portfolios to spot outperforming stocks and place spreads which will profit if the upward momentum continues.  Actually, the stock can even fall a little for the maximum gain to be realized on these spreads.

The 10 Terry’s Tips option portfolios enjoyed another stellar week last week, gaining an average of 1.2%, and making the ytd number a whopping 78% for all the portfolios combined.  This is over 7 times as great as the 2017 results for the market (SPY) which is up about 11%.

Terry

Earnings Growth To Fuel Further Momentum For Red Hat (RHT)

Red Hat reported above-consensus earnings in the past week and several analysts have refreshed their upside targets since.  Here are two of them – Red Hat PT raised to $128 at BMO Capital and Red Hat PT Raised to $117 at JPMorgan Following 2Q.

Red Hat’s earnings report triggered a push higher above a notable horizontal level at $108.04 that held the stock price lower on several attempts throughout the month prior to the report.  RHT also regained the 20-period daily moving average on the back of the same surge and hit fresh 52-week highs.  The horizontal level and the moving average fall in close proximity to each other, offering a strong confluence of downside support.

 

RHT Chart October 2017

RHT Chart October 2017

*source Tradingview.com

If you agree there’s further upside ahead for Red Hat, consider this trade which is a bet that the stock will continue to advance, or at least not decline very much over the next seven weeks.

Buy To Open RHT 17Nov17 105 Puts (RHT171117P105)
Sell To Open RHT 17Nov17 110 Puts (RHT171117P110) for a credit of $1.45 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when RHT was trading near $111.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

If you use our favorite broker for this trade, tastyworks, your commission on this trade will only be $1 per opening contract ($2 per spread) (and there is no commission on closing trades, only the $.10 clearing fee).  Each contract would then yield $143 and your broker would charge a $500 maintenance fee, making your investment $357 ($500 – $143).  If RHT closes at any price above $110 on November 17, 2017, both options would expire worthless, and your return on the spread would be 40% (325% annualized).

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

IBD Underlying Updates September 28, 2017

IBD Underlying Updates September 28, 2017

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

How to Make 30% on 5 Blue-Chip Companies in 2017 Even if They Fall by 10%

Tuesday, January 3rd, 2017

Today, we set up a new portfolio at Terry’s Tips  that I would like to tell you about.  It is our most conservative of 9 portfolios.  It consists of selecting 5 blue-chip companies which pay a dividend between 2% and 3.6% and which appear on at least two top analysts’ “top 10” lists for 2017.  This portfolio is designed to gain 30% for the year, and we can know in advance exactly what each of the 5 spreads will make in advance.  For most of these companies, they can fall by 10% over the course of the year and we will still make our 30% gain.

We are also repeating our best-ever offer to come on board before January 11 rolls around.

Terry

How to Make 30% on 5 Blue-Chip Companies in 2017 Even if They Fall by 10%

The spreads we are talking about are vertical put credit spreads.  Once you have found a company you like, you select a strike price which is about 10% below the current price of the stock, and you sell long-term puts (we used options expiring on January 19, 2018) at that strike price while buying the same series puts at a lower strike price.

One of the stocks we picked was Cisco (CSCO).   Here is an example of one of the spreads we placed today.  CSCO yields 3.6% which provides a nice base and support level for the stock.  It is trading just over $30, down a little from almost $32 a couple of months ago.  Our spread will make 30% in one year if CSCO manages to be any higher than $27 when the options expire a year from now.

Here is the exact spread we placed today:

Buy To Open 3 CSCO 19Jan18 23 puts (CSCO180119P23)

Sell To Open 3 CSCO 19Jan18 27 puts (CSCO180119P27) for a credit limit of $.96  (selling a vertical)

We received $96 less $2.50 commissions, or $93.50 per spread, or $280.50 placed in our account for the 3 spreads.  There will be a $400 maintenance requirement per spread ($1200 total) less the $280.50 we received, making our investment $919.50.  If CSCO closes at any price higher than $27 a little over a year from now, on January 19, 2018, both options will expire worthless, and we will get to keep our $280.50.  This makes it a 30% return on our investment.

The actual returns on the other 4 companies we placed this kind of a spread on was actually greater than this amount.  Become a Terry’s Tips  subscriber and get to see every one of them, including other spreads which are a little more aggressive but which yield over 50% for the year and the stock does not have to go up a penny to achieve that return.

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 over 100% in one year as our calendar spreads on Nike, Costco, Starbucks, and Johnson & Johnson have done in the last two years?  Or how our volatility-related portfolio gained 80% in 2016 with only two trades.

So what’s the investment?  I’m suggesting that you spend a small amount to get a copy of my 60-page (electronic) White Paper, and devote some serious early-2017 hours studying the material.

Here’s the Special Offer – If you make this investment in yourself by midnight, January 11, 2017, 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 favorite option strategies in detail, and shows you exactly how to carry them out on your own.

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 11 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 11 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.

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 fifteen years I have published Terry’s Tips.  But you must order by midnight on January 11, 2017. Click here, choose “White Paper with Insider Membership”, and enter Special Code 2017 (or 2017P for Premium Service – $79.95).

If you ever considered learning about the wonderful world of options, this is the time to do it.  Early in 2017, we will be raising our subscription fees for the first time in 15 years.  By coming on board now, you can lock in the old rates for as long as you continue as a subscriber.

Investing in yourself is the most responsible New Year’s Resolution you could make for 2017.  I feel confident that this offer could be the best investment you ever make in yourself.  And your family will love you for investing in yourself, and them as well.

Happy New Year!  I hope 2017 is your most prosperous ever.  I look forward to helping you get 2017 started right by sharing this valuable investment information with you.

Terry

If you 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 15 years of publication – only $39.95 for our entire package -here using Special Code 2017 (or 2017P for Premium Service – $79.95).

If you are ready to commit for a longer time period, you can save even more with our half-price offer on our Premium service for an entire year.  This special offer includes everything in our basic service, and in addition, real-time trade alerts and full access to all of our portfolios so that you can Auto-Trade or follow any or all of them.  We have several levels of our Premium service, but this is the maximum level since it includes full access to all nine portfolios which are available for Auto-Trade.  A year’s subscription to this maximum level would cost $1080.  With this half-price offer, the cost for a full year would be only $540.  Use the Special Code MAX17P.

 

An Interesting Bet on Apple

Monday, December 17th, 2012

Today I would like to share an actual spread I placed in my personal account today.  It is a simple bet that come January 18, 2013, Apple will be trading at some price above $500.  As I write this, AAPL is at $513.

This little bet will make 62% after commissions at any ending price above $500.  It doesn’t have to go up a penny to make this much in a single month.  In fact, it can fall $13 and the same gain will come my way.
Check it out.

An Interesting Bet on Apple

One of the biggest stock market mysteries I have ever experienced in 30 years of trading almost every day has been the recent implosion of Apple stock.  For years, I was on the lookout for companies whose P/E ratio was less than its growth rate.

Two months ago when AAPL was trading north of $700, its growth rate was more than double the P/E ratio (not even adjusting for cash), even taking the traditionally-conservative company projections for next quarter.  Opportunities like this are quite rare in the investment world, at least they have been in the past.

Since that time the stock has fallen nearly $200.  I was not alone in my surprise at such a drop.  The average price target for 48 analysts is $750.  How can so many presumably smart (and well-informed) people be so horribly wrong?  Maybe they aren’t, at least in the longer run.

Trying to catch the bottom of a falling stock has been compared to catching a knife dropped from a great height (with your bare hands, of course).  I must admit that I have made several attempts to catch a bottom over the past two months, and my portfolio value has dropped right along with the stock.  It has been a painful time for us Apple bulls.

But now I think the bottom is finally here.  From a technical standpoint, there seems to be a strong resistance point at $505.  I’m not much of a technical indicator guy, but so many people are that sometimes you just have to follow their lead.  It has come close to $505 a couple of weeks ago, rose sharply, and then retreated to test that level once again last week, and has since recovered a bit.

Much of the recent sell-off has been attributed to tax-related selling.  If a person had a huge gain in the stock (and anyone who has bought it in earlier years surely has), it might be better to sell your shares in 2012 to avoid what looks like a higher long-term capital gains rate that may be instituted in 2013.  Many people are expected the rate to increase from 15% to at least 25% next year.  That would make it a good time to take some profits.

Anyone who sold AAPL for tax reasons probably still likes the stock (after all, it did give them a big win) and may buy it back once they read about millions of new iPhone 5 sales at Christmas and in China (and now, even at Wal-Mart) and anticipate what those sales might mean to earnings.

There are many other reasons that the stock should be trading higher in 2013.  It usually spikes higher in advance of the January earnings announcement which should come just after the January options expire.  When the announcement is made, the P/E ratio will surely be even lower than it is today since this will be the first quarter when the iPhone 5 results are in (the most profitable Apple product, and the biggest problem has been making it fast enough to keep up with the demand).

So here’s the little bet I made that Apple will be trading at some point higher than $500 on January 18, 2013:

I bought AAPL Jan-13 495 puts and sold Jan-13 500 puts, collecting $195 per spread, or $192 after commissions (in options lingo, I sold a vertical put spread).  If the stock closes at any price below $495, I will have to buy the spread back for $500 and I will lose $308 (the maximum risk I am taking).

My broker will issue a maintenance requirement for $500 per spread (this is not a loan like a margin requirement, but $500 per spread will have to be set aside in the account).  Since I collected $192, my actual net charge will be $308.  By the way, this kind of a spread is allowed in IRA accounts at most brokerages, including thinkorswim.

At any price above $500, both options will expire worthless, no commissions will be due, and I will make a gain of $192 on my maximum risk of $308.  That works out to about 62% on my money at risk.  Not bad for one month.

Of course, you should not take this risk with money you can’t afford to lose.

 

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Success Stories

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

~ John Collins