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Stock Options 101

Welcome to Stock Options 101

Our goal is to explain stock options in simple English. As you learn more, you will appreciate how difficult a task it is. People say that investing in stock is like playing checkers, while investing in options is like playing chess. We look forward to teaching you how to play the more complex game of stock options.

Are Stock Options Risky?

Most people would answer that question with a resounding "yes". True, according to some studies, over half of all options that people buy end up being worth absolutely nothing. Nada! Tear up your ticket stub and walk away.

If buying options is such a bad investment, maybe a strategy of selling options to someone else would be a better idea. Let their loss be your gain. But there is a problem here as well - it is called selling a naked option, because that is how you feel for the whole time you have sold that option. You are facing a theoretical unlimited loss. You can lose many more times the amount you invested. At least when you bet on a horse, that is all you lose when he trips on his way to the finish line.

So if buying options is usually not a good idea, and selling them can be worse, it is easy to see why people decide that options are risky no matter what you do. It does not occur to most of them that a strategy of buying an option and simultaneously selling another option to someone else might be an entirely different story.

This website is designed to explain an options strategy that we believe is less risky than buying stock or mutual funds, and potentially a whole lot more profitable. We hope you will read through this material and learn to love the world of options as we do.

Why Trade Stock Options?

Stock options are exchanged for two main reasons: for speculation (adds risk) and for hedging (reduces risk).


Stock options are a way of leveraging your money. This is usually done by buying call options. You are able to participate in any upward moves of a stock without having to put up all the money to buy the stock. However, if the stock does not go up in price, the call option buyer may lose 100% of his/her investment. For this reason, options are considered to be risky investments.


Stock options can be used to considerably reduce risk. Put options are usually traded for hedging purposes. While hedging reduces risk, it also limits the amounts of gains you can make. Since most stock markets go up over time, and most people invest in stock because they hope prices will rise, there is more interest and activity in call options than there is in put options.

Terry's Tips Stock Options Trading Blog

October 18, 2016

Halloween Special – Lowest Subscription Price Ever

Halloween Special – Lowest Subscription Price Ever

Why must Halloween be only for the kids? You got them all dressed up in cute little costumes and trekked around the neighborhood in hopes of bringing home a full basket of cavity-inducing treats and smiles all around.

But how about a treat for yourself? You may soon have some big dental bills to pay. What if you wanted to learn how to dramatically improve your investment results? Don’t you deserve a little something to help make that possible?

What better Halloween treat for yourself than a subscription to Terry’s Tips at the lowest price ever? You will learn exactly how we have set up and carried out an options strategy that doubled the starting portfolio value (usually $5000) of five individual investment accounts which traded Costco (COST), Apple (AAPL), Nike (NKE), Starbucks (SBUX), and Johnson & Johnson (JNJ), including all commissions. These portfolios took between 7 and 17 months to double their starting value, and every single portfolio managed to accomplish that goal.

One year and one week ago, we set up another portfolio to trade Facebook (FB) options, this time starting with $6000. It has now gained over 97% in value. We expect that in the next week or two, it will surge above $12,000 and accomplish the same milestone that the other five portfolios did.

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 on their own 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 (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. The 10K Strategy is sort of like writing calls on steroids. It is an amazingly simple strategy that really works with the one proviso that you select a stock that stays flat or moves higher over time.

How else in today’s investment world of near-zero dividend yields can you expect to make these kinds of returns? Find out exactly how to do it by buying yourself a Halloween treat for yourself and your family. They will love you for it.

Lowest Subscription Price Ever

As a Halloween special, we are offering the lowest subscription price than we have ever offered – our full package, including all the free reports, my White Paper, which explains my favorite . . .

October 11, 2016

How to Make 40% With a Single Options Trade on a Blue Chip Stock

Bernie Madoff got billions of dollars from investors by offering 12% a year. Today I would like to share an investment which should deliver more than triple that return. I doubt if it gets Madoff-like money flowing into it, but maybe some of you will try it along with me. Nothing is 100% guaranteed, but the historical price action for this conservative stock shows that this options spread would make over 40% a whopping 98% of the time.


How to Make 40% With a Single Options Trade on a Blue Chip Stock

Johnson & Johnson (JNJ) is a $70 billion multinational medical devices, pharmaceutical and consumer packaged goods manufacturer founded in 1886. It is truly a “blue chip” stock which pays a 2.7% dividend and raises it almost every year.

JNJ has been a favorite underlying stock for us at Terry’s Tips. Early in November 2015 we . . .

October 6, 2016

Calendar Spreads Tweak #5 (Like Writing Calls on Steroids)

Lots of people like the idea of writing calls. They buy stock and then sell someone else the right to repurchase their shares (usually at a higher price) by selling a call against their shares. If the stock does not go up by the time that the call expires, they keep the proceeds from the sale of the call. It is sort of like a recurring dividend.

If writing calls appeals to you, today’s discussion of an option strategy is right up your alley. This strategy is like writing calls on steroids.


Calendar Spreads Tweak #5 (Like Writing Calls on Steroids)

When you set up a calendar spread, you buy an option (usually a call) which has a longer life than the same-strike call that you sell to someone else. Your expected profit comes from the well-known fact that the longer-term call decays at a lower rate than the shorter-term call you sell to someone else. As long as the stock does not fluctuate a whole lot, you are guaranteed to . . .

Making 36%

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

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

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

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