from the desk of Dr. Terry F Allen

Skip navigation

Member Login  |  Contact Us  |  Sign Up

1-800-803-4595

Posts Tagged ‘Volatility’

Back-to-School Special – Lowest Price Ever

Wednesday, September 6th, 2017

Back-to-School Special – Lowest Price Ever

Why must back-to-school purchases only be for the kids?  You got them new back-packs and pens and pads and lots of other things to help them make their learning experience a little easier or fun.

But how about yourself?   How about adults who would like to learn a little something, too?  What if you would like to learn how to dramatically improve your investment results?  Don’t you deserve a little something to help make that learning experience possible?

What better back-to-school gift could there be than a subscription to Terry’s Tips at the lowest price ever?  You will learn exactly how we have made over 100% so far this year trading our favorite strategy on two different stocks, and how you can do it yourself with your favorite stock.

We carry out 10 different portfolios with different options strategies, and you can learn each strategy and follow the actual results (including commissions) with all the trades we have made.  The composite average gain the 10 portfolios for the first 8 months of 2017 has been over 60%.

At the beginning of 2017, we set up an account to use our favorite strategy (we call it the 10k Strategy) using Mastercard (MA) options. MA has had a good run, gaining 27% so far this year.  Our portfolio has gained 110%, about 4 times as much.  Another portfolio was lucky enough to select Facebook (FB) as its underlying.  FB has gained 50% through the first 8 months of 2017 while our portfolio has gained 338%, over 6 times as much. Come on board and see every trade that we made in all 10 portfolios.

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

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

We have other portfolios which have more modest goals.  Our most conservative portfolio selected 5 blue chip companies at the beginning of 2017 and used a strategy that would make a gain as long as these companies did not fall by 10% over the course of the year.  The annual goal for this portfolio was 30%, but it has over-achieved, picking up 32% so far, and is guaranteed to make 40% for the year as long as the underlying stocks don’t fall over 10% from here. (One of the underlyings, (JNJ) can only fall 6% for us to make the 40%.)

Another conservative portfolio was set up to make over 30% for the year as long as the overall market (the S&P 500) did not fall by more than 5% over the course of the year.  As you may know, the market has done quite well so far, gaining almost 10%, while our portfolio could be closed out for a 32% gain right now, and is on target to gain 40% for the year unless SPY drops over 15% between now and the end of the year.

These portfolios are carried out in separate broker accounts for our subscribers to follow.  We count all the commissions and don’t hide any of the trades (like many newsletters do).  Don’t you think you owe it to yourself to learn how we have done it and how you can do it on your own?

Lowest Subscription Price Ever:  As a back-to-school special, we are offering the lowest subscription price that we have ever offered – our full package, including all the free reports, my White Paper, which explains my favorite option strategies in detail, and shows you exactly how to carry them out on your own, a 14-day options tutorial program which will give you a solid background on option trading, and two months of our weekly newsletter full of tradable option ideas.  All this for a one-time fee of $39.95, less than half the cost of the White Paper alone ($79.95).

For this lowest-price-ever $39.95 offer, click here, enter Special Code BTS17 (or BTS17P for Premium Service – $79.95).

This is a time-limited offer.  You must order by Monday, September 18, 2017.  That’s when the half-price offer expires, and you will have to go back to the same old investment strategy that you have had limited success with for so long (if you are like most investors).

This is the perfect time to give you and your family the perfect back-to-school gift that is designed to deliver higher financial returns for the rest of your investing life.

I look forward to helping you get the school year started off right by sharing this valuable investment information with you at the lowest price ever. It may take you a little homework, but I am sure you will end up thinking it was well worth the investment.

Happy trading.

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 16 years of publication – only $39.95 for our entire package.  Get it here using Special Code BTS17 (or BTS17P for Premium Service – $79.95).   Do it today, before you forget and lose out.  This offer expires on Monday, September 18, 2017.

Facebook (FB) Is Set To Resume Higher After The Price Correction

Monday, September 4th, 2017

This week we are discussing a well-known company that is listed on the Investor’s Business Daily (IBD) Top 50 List.  In one of our portfolio’s, we screen this list to identify trending stocks to place spreads that profit if the stock continues higher.  Actually, the stock can even decline a little to realize the maximum gain.

Terry’s Tips carries out 10 different portfolios for paying subscribers.  Each portfolio is set up in an actual broker account and all results include full commissions.  Last week was an unusually good one for these portfolios – every one of them made gains, and the average composite gain was a whopping 8.9%.  So far in 2017, these portfolios have picked up an average of 67.8%.  How sweet it is.

Terry

Facebook (FB) Is Set To Resume Higher After The Price Correction

Several analysts believe there is further upside ahead for Facebook, here are two of them – Why Facebook Inc (FB) Stock Can Still Run Much Higher and Flagging Facebook Inc (FB) Stock for a Bullish Breakout.

The second article identifies a bull flag pattern which offers a technical signal for a bullish continuation.  Alternatively, the price action that takes place from around the end of July to late September can be viewed as a pennant.  Both patterns signal the same thing which is a continuation of the bullish trend.

Continuation patterns tend to be respected by technical traders, especially when it follows a strong uptrend which has been the case with Facebook.

FB Chart September 2017

FB Chart September 2017

*source Tradingview.com

If you agree there’s further upside ahead for Facebook, 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 FB 20Oct17 165 Puts (FB171020P165)
Sell To Open FB 20Oct17 170 Puts (FB171020P170) for a credit of $1.59 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when FB was trading near $172.  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 $157 and your broker would charge a $500 maintenance fee, making your investment $343 ($500 – $157).  If FB closes at any price above $170 on October 20, 2017, both options would expire worthless, and your return on the spread would be 46% (340% annualized).

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

IBD Underlying Updates September 1, 2017

IBD Underlying Updates September 1, 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

Is Applied Materials (AMAT) Ready to Accelerate Higher?

Monday, August 28th, 2017

This week we are featuring a company listed on the Investor’s Business Daily (IBD) Top 50 List.  We use this list in one of our portfolios to target outperforming stocks and look to place options spreads that take advantage of the underlying trend..

You might be interested to know that Terry’s Tips carries out 10 actual options portfolios for paying subscribers to follow if they wish.  This week was a typical one for us.  The market (SPY) rose 0.8% while our composite portfolio average gained 2.8%.  So far for the year, our composite average has gained 54% (after commissions).

Terry

Is Applied Materials (AMAT) Ready to Accelerate Higher?

Several analysts have recently refreshed their bullish outlook towards Applied Materials and have raised price targets.  These articles provide more details Applied Materials Gets Several Price-Target Hikes on Earnings and Applied Materials Targets Surge On Upbeat Memory Chip, Display Markets.

From a technical perspective, AMAT has been consolidating within a range since around May with buyer’s holding the stock well above the $40.00 price point.  Buyer’s lifted the price higher about two weeks ago on an approach to the lower bound of the range.  While a horizontal level at $43.06 initially acted as resistance in the turn, the level held several declines in the past week.  AMAT shows a strong bullish trend on a weekly chart dating back to early 2016, and like several of the IBD Top 50 stocks, has been an outperformer within its sector.

AMAT Chart August 2017

AMAT Chart August 2017

*source Tradingview.com

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

Buy To Open AMAT 29Sep17 42.5 Puts (AMAT170929P425)
Sell To Open AMAT 29Sep17 43 Puts (AMAT1700929P430) for a credit of $0.17 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when AMAT was trading near $43.  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 $15 and your broker would charge a $50 maintenance fee, making your investment $35 ($50 – $15).  If AMAT closes at any price above $43 on September 29, 2017, both options would expire worthless, and your return on the spread would be 43% (446% annualized).

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

IBD Underlying Updates August 25, 2017

IBD Underlying Updates August 25, 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

Transunion (TRU): A Stable and Consistent Player

Monday, July 31st, 2017

This week we are discussing another one of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our portfolio’s to find stocks that have displayed consistent upwards momentum and we look to place spreads that take advantage of this underlying strength.

Terry

Transunion (TRU): A Stable and Consistent Player

Several analysts have recently refreshed their bullish outlook towards Transunion.  UBS Asset Management has increased their stake in the company and both Morgan Stanley as well as Deutsche Bank have raised their price targets to $50.

Transunion has been trading higher within a rising trend channel since the middle of February.  After testing the lower line of the trend channel in the past week, the stock recovered to hit a fresh 52-week high.  The $44.45 level held the stock price lower for a month prior to finally breaking above it earlier this month.  The level is now viewed as support and its proximity to the 20-day moving average as well as the channel bottom emphasizes the area as strong support.

 

TRU Chart July 2017

TRU Chart July 2017

*source Tradingview.com

If you concur that there’s further upside ahead for Transunion, consider this trade which is a bet that the stock will continue to advance, at least a little.

Buy To Open TRU 15SEP17 45 Puts (TRU170915P45)
Sell To Open TRU 15SEP17 46 Puts (TRU170915P46) for a credit of $0.46 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when TRU was trading just above  $45.  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 $44 and your broker would charge a $100 maintenance fee, making your investment $56 ($100 – $44).  If TRU closes at any price above $46 on September 15, 2017, both options would expire worthless, and your return on the spread would be 78% (624% annualized).

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

IBD Underlying Updates July 31, 2017

IBD Underlying Updates July 31, 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.  The Terry’s Tips portfolio which places spreads like the above one has gained 114.7% so far in 2017 in spite of incurring some losses on some of the spreads placed.  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

Macom Tech Solutions (MTSI) Surges to All-Time High, What’s Next?

Monday, July 24th, 2017

This week we are featuring a company listed on the Investor’s Business Daily (IBD) Top 50 List that broke to an all-time high in the past week.  In one of our portfolio’s, we use the IBD Top 50 List to find stocks that show strong upward momentum 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.

Terry

Macom Tech Solutions (MTSI) Surges to All-Time High, What’s Next?

Macom Technology Solutions had its price target recently raised by Needham & Company and several firms have added to already sizeable positions.  Here are two of them-  First Trust Advisors LP Increases Stake in Macom Technology Solutions Holdings and FMR LLC Boosts Position in Macom Technology Solutions Holdings.

MTSI has been in an uptrend since late 2012 and broke to an all-time high in the past week.  The technical break followed an 8-week consolidation below a horizontal resistance level at $61.25 which is now viewed as strong support.  MTSI surged above the level on Thursday and held near its highs into the weekly close to offer confirmation of a sustained bullish break.

MTSI Chart July 2017

MTSI Chart July 2017

*source Tradingview.com

If you concur that there’s further upside ahead for Macom Technology Solutions, 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 MTSI 18Aug17 55 Puts (MTSI170818P55)
Sell To Open MTSI 18Aug17 60 Puts (MTSI170818P60) for a credit of $1.18 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when MTSI was trading near $63.  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 $116 and your broker would charge a $500 maintenance fee, making your investment $384 ($500 – $116).  If MTSI closes at any price above $60 on August 18, 2017, both options would expire worthless, and your return on the spread would be 30% (395% annualized).

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

IBD Underlying Updates July 21, 2017

IBD Underlying Updates July 21, 2017

IBD Underlying Updates July 21, 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.  The Terry’s Tips portfolio which places spreads like the above one has gained 113.5% so far in 2017 in spite of incurring some losses on some of the spreads placed.  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

Is Taiwan Semiconductor (TSM) Ready To Resume Higher?

Tuesday, July 18th, 2017

This week we are featuring a company that was just added to the Investor’s Business Daily (IBD) Top 50 List.  I hope that it is of interest to you.  The Terry’s Tips’  portfolio that places trades on our selections from the IBD Top 50 List has gained 117.7% so far in 2017.  Terry’s Tips subscribers who have trades placed in their accounts through Auto-Trade or who follow the portfolio on their own are happy campers right now.

Terry

Is Taiwan Semiconductor (TSM) Ready To Resume Higher?

Taiwan Semiconductor has been gaining popularity among investors as the company supplies key components used in the Iphone.  Apple’s smartphone saw sales exceeding 50 million units last quarter.  These analysts weigh in on why there may be further upside ahead for Taiwan Semiconductor’s stock price – 3 Things This Apple Inc. Supplier Wants You to Know and How To Become A Billionaire In One Step: Sell Components To Apple.

The technical indicators point to a healthy uptrend in TSM.  The stock price recently bounced higher from support at $34.42 and has regained the 20-day moving average.  The stock has held above the same moving average on a weekly chart for most of this year.  A rising trend channel has been in play since May last year and the lower line of the channel offers additional support near recent lows.

TSM Chart July 2017

TSM Chart July 2017

*source Tradingview.com

If you concur Taiwan Semiconductor is ready to resume higher, 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 TSM 18Aug17 34 Puts (TSM170818P34)
Sell To Open TSM 18Aug17 35 Puts (TSM170818P35) for a credit of $0.21 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when TSM was trading near $36.  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 $19 and your broker would charge a $100 maintenance fee, making your investment $81 ($100 – $19).  If TSM closes at any price above $35 on August 18, 2017, both options would expire worthless, and your return on the spread would be 23% (299% annualized).

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

IBD Underlying Updates July 14, 2017

IBD Underlying Updates July 14, 2017

IBD Underlying Updates July 14, 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.  The Terry’s Tips portfolio which places spreads like the above one has gained 80% in the first six months of 2017 in spite of incurring some losses on some of the spreads placed.  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

Align Technology (ALGN) A Buy After Being Added To The S&P 500

Monday, July 3rd, 2017

This week we are featuring a company listed on the Investor’s Business Daily (IBD) Top 50 List that has also recently been added to the S&P 500 index.  The stock has displayed strong upwards momentum and we look to place spreads that take advantage of this underlying strength.

Terry

Align Technology (ALGN) A Buy After Being Added To The S&P 500

Align Technology is the designer and manufacturer of the Invisalign System which they state is the most advanced clear aligner system in the world.  Analysts are optimistic of the company’s growth prospects and have recently revised up their expectations.  Zacks ranks this stock as a Strong Buy and these analysts have recently raised their targets: Align Technology (ALGN) PT Raised to $175 at Morgan Stanley; Huge At-Home Ortho Opportunity and Leerink Lifts Target On Align Technology, Sees 27% Upside.

From a technical perspective, ALGN boasts a strong uptrend and trades above key technical indicators.  On a daily chart, the stock jumped above the 20-day moving average following an earnings report in January and has held above it since.

A rising trend channel has been identified to contain price action since late April and a horizontal level at $145.24 offers additional support to create a confluence near the lower bound of the trend channel.

ALGN Chart July 2017

ALGN Chart July 2017

*source Tradingview.com

If you agree there’s further upside ahead for Align Technology, 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 ALGN 18Aug17 140 Puts (ALGN170818P140)
Sell To Open ALGN 18Aug17 145 Puts (ALGN170818P145) for a credit of $1.60 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when ALGN was trading near $150.  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 $158 and your broker would charge a $500 maintenance fee, making your investment $342 ($500 – $158).  If ALGN closes at any price above $145 on August 18, 2017, both options would expire worthless, and your return on the spread would be 46% (342% annualized).

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

IBD Underlying Updates July 1, 2017

IBD Underlying Updates July 3, 2017

IBD Underlying Updates June 30, 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.  The Terry’s Tips portfolio which places spreads like the above one has gained 80% in the first six months of 2017 in spite of incurring some losses on some of the spreads placed.  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

Merck Breaks Out, can it Continue to Trade Higher?

Wednesday, June 28th, 2017

This week we are featuring an option trading idea based on a stock that just broke out following the Senate healthcare bill.  I hope that it is of interest to you.

Terry

Merck Breaks Out, can it Continue to Trade Higher?
Merck, broke out to fresh all-time highs last week following news from the proposed senate bill that would allow for less regulation and would not crack down on drug pricing.  The Senate appears to be moving toward a vote, which should keep MRK buoyed.

If you concur with the views expressed by these analysts, consider making this trade which is a bet that MRK will continue to advance (or at least not decline very much) over the next six weeks:

Technicals

After breaking out, prices are consolidating above the recent breakout level.  The stock should remain above a downward sloping trend line that shows support near $65. Additional support is seen near the 20-day moving average at $64.33.  Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal.

MRK Chart June 2017

MRK Chart June 2017

*source Stockcharts.com

Buy To Open MRK AUG18   62.50 puts (MRK170818P625
Sell To Open MRK AUG18   65.00 puts (MRK170818P650) for a credit of $0.65 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when MRK was trading slightly above $66.20.  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 $2 per spread (and there is no commission on closing trades, only the $.10 clearing fee).  Each contract would then yield $63 and your broker would charge a $250 maintenance fee, making your investment $187 ($250 – $63).  If MRK closes at any price above $65 on August 18, 2017, both options would expire worthless, and your return on the spread would be 34% (230% annualized).

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

Happy trading,

Terry

Actual Positions in One Terry’s Tips Portfolio

Monday, June 5th, 2017

For the first time ever, I will share with you the exact strategy we use in one of the 9 portfolios we carry out at Terry’s Tips.  I will reveal the exact positions we have in this portfolio, their original cost, and our reasoning for putting them on.  This portfolio started out with $3000 at the beginning of 2017, and has gained 83% so far.  It is not our best performing portfolio, but it exceeds the average 2017 gain of 51.7% for all 9 portfolios.

Terry

Actual Positions in One Terry’s Tips Portfolio

Our Honey Badger portfolio is one of our most aggressive (least conservative).  Our strategy is to select companies which rank high on the Investor’s Business Daily Top 50 List, and make the assumption that these high-momentum stocks will continue to be strong for another six or ten weeks.  The stocks don’t actually have to go up at all for us to make the maximum gain on the spreads we place.  We select strike prices which are just below the then-current stock price so we can tolerate a small drop in the price while we hold the positions.

Here are the exact words we published in our June 3, 2017 Saturday Report which reviews performance of all nine portfolios:

Summary of Honey BadgerPortfolio This portfolio started with $3000 in early January 2017.  It will be our most aggressive portfolio. We will select companies from Investor’s Business Daily (IBD) highest-ranked momentum list (The Top 50) and sell vertical put credit spreads betting that the momentum will last at least another 2 months or so.  In 2017, we have had profitable trades with NVDA, HQY, AMAT, ANET, and ULTA, and suffered a big loss on GS which fell by $30 after we placed the trade.

Current positions:

On May 8 when LRCX was trading at $152:
Buy To Open (BTO) 3 LRCX 16Jun17 145 puts (LRCX170616P145)
Sell To Open (STO) 3 LRCX 16Jun17 150 puts (LRCX170616P150) for a credit of $1.90  (selling a vertical)
If LRCX ends up above $150 on June 16, this spread will gain $562.50 after commissions on an investment of $937.50, or 60% (360% annualized)

On May 11 when AVGO was trading at $230:

BTO 4 AVGO 23Jun17 220 puts (AVGO170623P220)

STO 4 AVGO 23Jun17 225 puts (AVGO170623P225) for a credit of $1.62  (selling a vertical)   If ULTA ends up above $225 on June 23, this spread will gain $638 after commissions on an investment of $1362, or 47% (281% annualized)

On May 11 when ULTA was trading at $300:

BTO 4 ULTA 16Jun17 290 puts (ULTA170616P290)

STO 4 ULTA 16Jun17 295 puts (ULTA170616P295) for a credit of $1.90  (selling a vertical)

If ULTA ends up above $295 on June 17, this spread will gain $750 after commissions on an investment of $1250, or 60% (360% annualized)

Honey Badger Portfolio Positions June 2017

Honey Badger Portfolio Positions June 2017

 Results for the week:  With AVGO (at $254.53) up $13.32 (5.5%), LRCX (at $158.74) up $3.62 (2.3%) and ULTA (at $311.47) up $9.07 (3.0%), for the week, the portfolio gained $810 or 17.3%.   The big gain this week came about because of the surge in AVGO which makes the spread almost certain to make the maximum gain when it expires in three weeks.  All three stocks in this portfolio are comfortably above the price then need to be to achieve the maximum gain.  If they remain above the strike of the option we have sold, we will pick up another $180 in 3 weeks.  This will make the gain for the first six months of the year a nice 88% (after commissions, of course).

Since the IBD Top 50 list is such an important source for this portfolio, we keep a careful watch on the stocks which are added on to the list each week and which ones are deleted.  Over time, we hope to determine whether deletions might be good prospects for bearish spreads.  Momentum often works in both directions, and perhaps stocks which had strong upward momentum will have strong downward momentum when IBD determines that the upward trend has ended.

Here are the changes we reported to our subscribers this week:

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

IBD Underlying Updates June 2017

IBD Underlying Updates June 2017

We hope you enjoyed this peek at one of our portfolios, and the strategy we use in this portfolio.  While we know that lots of newsletters out there are making all sorts of great promises about how wonderful their performance is, we don’t know of a single one which will reveal all their trades and is doing anywhere near what we have done. Our results include all commissions as well (most newsletters conveniently ignore commissions to make their results look better).  We invite you to come on board and share in our success.

Happy trading,

Terry

40% Possible in 2 Weeks With an Iron Condor?

Monday, April 17th, 2017

Today’s idea involves an esoteric Exchange Traded Product (ETP) called SVXY.  It is one of our favorite underlyings at Terry’s Tips.  Chances are, you don’t know very much about it, and I can’t help you much in this short note.  But I will share a trade I made on this ETP this morning, and my thinking behind this trade.

Terry

40% Possible in 2 Weeks With an Iron Condor?

The best way to explain how SVXY works might be to explain that it is the inverse of VXX, the ETP that some people buy when they fear that the market is about to crash.  Many articles have been published extolling the virtues of VXX as the ideal protection against a setback in the market.  When the market falls, volatility (VIX) most always rises, and when VIX rises, VXX almost always does as well.  It is not uncommon for VXX to double in value in a very short time when the market corrects.

The only problem with VXX is that in the long run, it is just about the worst equity that you could imagine buying.  Over the last 5 years, it has fallen from a split-adjusted several thousand dollar price to today’s $18 level.  About every year and a half, a reverse 1-for-4 reverse split must be engineered on VXX to keep the price high enough to bother with buying.  The last time this happened was in August 2016.  It pushed the price up from just over $9 to about $40, and it has lost over half its value since then.

Clearly, you would only buy VXX if you felt strongly that the market was about to implode.  Most of the time, we prefer to own the inverse of VXX.  That is SVXY.  So far, it has gone from $90 to over $140 in 2017, only to fall back to about $123 last week when geopolitical fears arose and depressed the market a bit, and even more significant for volatility-related ETPs like VXX and SVXY, volatility (VIX) rose from the 11 -13 range where it has hung out most of the time for the past few years to about 16 today.

When VIX rose and SVXY fell last week, something interesting happened. Implied volatility (IV) of the SVXY options skyrocketed to nearly double what it was a month ago.  I think that these high option prices will not exist for too long, and would like to sell some at this time.

Rather than selling either or both puts and calls naked (inviting the possibility of unlimited loss), a good way of selling high-IV options is through an iron condor spread.  I believe that SVXY, trading near the $123 where it opened this morning, is unlikely to be higher than $135 or lower than $95 in 11 days when the 28April17 options expire.

This is the spread I executed this morning:

Buy to Open # 28Apr17 140 calls (SVXY170428C140)
Sell to Open # 28Apr17 135 calls (SVXY170428C135)
Buy to Open # 28Apr17 90 puts (SVXY170428P90)
Sell to Open # 28Apr17 95 puts (SVXY170428P95) for a credit of $1.63 (selling an iron condor)

I received $163 for each contract I sold, less $5 in commissions.  My maximum loss is $500 less the $158 net I received, or $342.  If SVXY ends up at any price between $95 and $135 on April 28, all of these options will expire worthless and I will be able to keep my $158.  This works out to a 46% gain for the 11 days of waiting.

As with any investment, you would only commit money that you can truly afford to lose.  I like my chances here, and I committed an amount that would not change my style of living if I lost it.

Making 36%

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

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

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

Order Now

Success Stories

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

~ John Collins