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Auto-Trade with thinkorswim® FAQ

Auto-Trade is a mechanism whereby an investor enters into an agreement with his broker authorizing the broker to make trades in the investor’s account based on recommendations of a financial newsletter such as Terry’s Tips.

It is important to understand that we are not a licensed investment advisor. We publish an investment newsletter that maintains several portfolios (with different strategies and underlying stocks or ETFs). We offer investment ideas but we are not managing your money or acting as an investment advisor. We do not make recommendations concerning which portfolios might be best for you. If you choose to mirror one of our portfolios, you are making an investment decision on your own, regardless of whether you have signed up for Auto-Trade with your broker or not.

Subscribers to our Premium Service receive (if they request it) real-time Trade Alerts emailed to them as well as to a broker of their choice where they might have an Auto-Trade arrangement. Our regular service subscribers receive Trade Alerts at the end of the day when our recommended prices might not still be available, and these subscribers are not eligible to sign up for Auto-Trade (for Terry’s Tips) with their brokers.

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How much does it cost?

# of PortfoliosMonthly Fee
1$49.98
2$69.98
3 or more$89.98

One of the great features is that the cost of the program does not come out of your invested capital as it does with so many other investments.

How do I sign up for Auto-Trade?

First you would sign up for our Premium membership and select the portfolio(s) you?d like to follow. Then you would open and fund an account with a participating broker, select Terry's Tips as your newsletter provider, and select the number of units of each portfolio you would like to trade. Full instructions are provided for our members.

What brokers offer Auto-Trade?

The Auto-Trade program is available through thinkorswim, Inc. by TD Ameritrade — www.thinkorswim.com (or any other broker of your choice who is willing to place trades on your behalf following our Trade Alerts).

Does my Auto-Trade account have to be separate from other accounts?

It is recommended that you set up a separate account for Auto-Trade although it is not necessary.

Can I get out of the Auto-Trade program at any time?

Yes, you may cancel at any time. You must cancel with Terry's Tips as well as with the broker. You are responsible for removing any current positions from your account when you cancel.

Do you have access to my Auto-Trading account?

No. We have no access to your personal accounts. We have no idea how much money you have invested or what other holdings you have.

How do I change to a different level of Premium service?

If you are already a Premium member, you may simply send an email to autotradeREMOVETHISBEFORESENDING@terrystips.com to let us know how many portfolios you will be following (real time alerts and/or Auto-Trade).

What should I do if I decide to add (or remove) other portfolios through Auto-Trade?

Please email autotradeREMOVETHISBEFORESENDING@terrystips.com with the name of the portfolio you will be adding (or removing). Your billing will be adjusted accordingly.

Can I still join a portfolio even if I missed the start date?

Yes, a member may join any current portfolio. The only thing to note is that the unit amount is no longer the flat starting value. Once the portfolio starts trading, the unit value becomes a variable and is based on the actual account value. If you are not an Insider of Terry's Tips, please inquire about the most recent unit values for our various portfolios at autotradeREMOVETHISBEFORESENDING@terrystips.com.

Current Terry's Tips Insiders can learn the approximate amount required to join any of the current strategy portfolios by reviewing the Summary of Strategy Portfolios chart in our Saturday Report.

Is there a limit to how much I can invest?

No. There is no limit to how much money you can invest. In fact, we know nothing about your account or how much investment capital you have devoted to mirroring our portfolios.

Is there a limit to how many people or how much total capital this program can handle?

At the present time, we are not worried that the collective trades of Terry's Tips subscribers who have signed up for Auto-Trade with their brokers will affect the market. In fact, our experience has been that the larger the number of options your broker places as a single order, the better the price that can be negotiated.

When option positions are put on, the person on the other side of the trade is usually a market maker (Terry used to be one, so he has a solid understanding of how they work). The market maker earns his living by buying at the bid price and selling at the asked price - the more action for him, the better. He usually seeks a delta neutral position, so that he does not care which way the market moves.

There are dozens of other spread strategies a market maker employs - including buying or selling the stock, use of both puts and calls - back spreads, butterflys, trading against the box, ratio spreads, vertical spreads, diagonal spreads, straddles, and even strangles. Whenever a market maker is faced with a large demand for one particular option, he will use that demand as part of a larger strategy he is following. The bottom line is that large numbers of any single option can be traded without affecting its price (this does not hold true for less-actively traded options in individual companies, however).

Terry's Tips Stock Options Trading Blog

September 30, 2016

IBM Pre-Announcement Play

IBM announces earnings on October 17, less than three weeks from now. I would like to share with you a strategy I used today to take advantage of the extremely high option prices which exist for the option series that expires on October 21, four days after the announcement. I feel fairly confident I will eventually make over 100% on one or both of these trades before the long side expires in six months.

Terry

IBM Pre-Announcement Play

One of my favorite option strategies is to buy one or more calendar spreads on a company that will be announcing earnings in a few weeks. The option series which expires directly after the announcement experiences an elevated Implied Volatility (IV) relative to all the other option series. A high IV means that those options are relatively expensive compared to all the other options that are trading on that stock.

IV for the post-announcement series soars because of the well-known tendency for stock prices to fluctuate far more than usual once the announcement is made. It may go up if investors are pleased with the company’s earnings, sales, or outlook, or it may tumble because investors were expecting more. While there is some historical evidence that the stock usually moves in the opposite direction that it did in the week or two leading up to the announcement, it is not compelling enough to always bet that way.

IBM has risen about $5 over the last week, but it is trading about equal to where it was two weeks ago, so there is no indication right now as to what might happen after the announcement.

IBM has fluctuated by just under 4% on average over the last few announcement events. That would make an average of $6 either way. I really have no idea which way it might go after this announcement, but it has been hanging out around it/s current level (just under $160) for a while, so I am planning to place my bet around that number

In the week leading up to . . .

September 21, 2016

Calendar Spreads Tweak #4

Today I would like to discuss how you can use calendar spreads for a short-term strategy based around the date when a stock goes ex-dividend. I will tell you exactly how I used this strategy a week ago when SPY paid its quarterly dividend.

Terry

Calendar Spreads Tweak #4

Four times a year, SPY pays a dividend to owners of record on the third Friday of March, June, September, and December. The current dividend is about $1.09. Each of these events presents a unique opportunity to make some money by buying calendar spreads using puts to take advantage of the huge time premium in the puts in the days leading up to the dividend day.

Since the stock goes down by the amount of the dividend on the ex-dividend day, the option market prices the amount of the dividend into the option prices. Check out the situation for SPY on Wednesday, September 14, 2016, two days before an expected $1.09 dividend would be payable. At the time of these prices, SPY was trading just about $213.70.

September 7, 2016

Calendar Spreads Tweak #2

This week we will continue our discussion of a popular option spread – the calendar spread which is also called a time spread or horizontal spread. We will compare the expected costs and potential returns if you select different time periods for the long and short sides of the calendar spread.

Terry

Calendar Spreads Tweak #2

First, let’s look at a typical calendar spread on Facebook (FB). Today, the stock is trading just over $130, and you might buy an at-the-money calendar spread by placing this order:

Buy To Open 1 FB 16Dec16 130 call (FB161216C130)
Sell To Open 1 FB 14Oct16 130 call (FB161014C130) for a debit of $3.75 (buying a calendar)

This spread would cost about $3.75 ($375) to buy, plus $2.50 in commissions at the rate Terry’s Tips’ subscribers pay at thinkorswim, for

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