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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).

Speculation

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.

Hedging

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

January 11, 2017

An Interesting Short-Term Play on Aetna (AET)

We are always on the lookout for unusual option prices that might indicate a better-than-usual investment opportunity. I would like to share one of those recent opportunities with you, one I personally acted on and passed on to Terry's Tips subscribers last Saturday. It involves the venerable insurance company, Aetna.

Terry

An Interesting Short-Term Play on Aetna (AET)

This week, we are looking at Aetna (AET), a health care benefits company. If you check out its chart, you can see that it does not historically make big moves in either direction, especially down:

January 3, 2017

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

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

December 30, 2016

Invest in Yourself in 2017 (at the Lowest Rate Ever)

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 2017 (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…

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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Sign up for Dr. Terry F Allen’s free newsletter and get immediate access to his most current report on his stock option trading strategies.

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