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Tip 2 - Check Out Auto-Trade

Auto-Trade is a service offered by several on-line brokers.  Auto-Trade makes it possible for an investor to carry out an options strategy in his own account without becoming an options guru or making all the trades on his or her own. 

This is how it works.  First, you subscribe to an investment newsletter (we hope you will pick Terry’s Tips, but there are dozens of others you can choose from as well).  Then you sign an agreement with a broker which authorizes him to make trades in your account in accordance with recommendations made by the newsletter.  You specify how much you cash you would like to allocate to the newsletter’s recommendations.

Terry’s Tips operates a little differently than most newsletters.  We maintain 8 actual portfolio accounts (using different underlying stocks or ETFs and risk levels). When you sign up for Auto-Trade at a broker for the Terry’s Tips newsletter, you tell the broker which portfolios you would like to mirror, and how many “units” you would like to employ.  For example, if we have a portfolio that would require $5,000 to mirror, and you would like to invest $10,000 in that portfolio, you would select 2 units. 

For most of our portfolios, when the portfolio gains more than 3% over the "starting" value, we withdraw the gains (in increments of 3%) so that new subscribers can mirror the portfolio with close to the starting value.  Of course, subscribers can decide on their own if they want to withdraw cash from their account, or use it to make other investments.

Terry’s Tips is also different from other newsletters in two important ways.  First, since our portfolios are actual broker accounts, we account for all commissions.  Many newsletters display their results and do not account for commissions.  This is extremely misleading because commissions on option portfolios can be huge – sometimes 30% or more over the course of a year.  Our results are always net of commission costs.

Second, Terry’s Tips portfolio results are an open book. We believe in full disclosure.  Insiders can see every trade ever made in every portfolio.  Nothing is swept under the rug.  Other newsletters may tell you only about the one portfolio you have signed up for, and if that one doesn’t make money for you, they might tell you that you were just unlucky because you didn’t sign up for one of the profitable ones that they conducted.

At the present time, the only broker who offers an Auto-Trade program honoring Terry's Tips Trade Alerts is a Chicago broker with the unlikely name of thinkorswim, Inc by TD Ameritrade.  Several other brokers have asked us to be added to their list of investment newsletter providers, but we have not accepted their offers because we have been totally satisfied with thinkorswim, Inc by TD Ameritrade.  In fact, our experience has taught us that there is not a single reason why any options investor should use a different broker for their Auto-Trade program.  Here are some of the reasons:

  • Extremely options-friendly
  • Best (free) options software available anywhere
  • Low commissions.
  • Choice of several commission plans depending whether your average option order quantities are small or large (10 or more).
  • Great personal service.  For example, they will set up one of our portfolios on any Wednesday for you other than during the monthly expiration week so you don’t have to place all the trades yourself.
  • No extra charge for orders placed through a broker
  • And best of all – they get excellent executions.  Barron’s named them the best broker for executing option orders, and our experience has been the same.  At one time, other brokers had Auto-Trade for Terry’s Tips, and many times we discovered that the thinkorswim, Inc by TD Ameritrade brokers had executed far better prices than the other brokers received, saving subscribers many dollars (often enough to pay for their entire Terry’s Tips Premium Service subscription price).

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Terry's Tips Stock Options Trading Blog

August 29, 2014

Ongoing Spread SVXY Strategy – Week 3

Two weeks ago we started a $1500 demonstration portfolio using SVXY, an ETP that is destined to move higher over the long run because of the way it is constructed (selling VIX higher-priced futures each day and buying at the spot price of VIX, a condition called contango which exists about 90% of time).

Today, contango is . . .

August 22, 2014

Ongoing Spread SVXY Strategy – Week 2

Last week we started a $1500 demonstration portfolio using SVXY, and ETP that is destined to move higher over the long run because of the way it is constructed (selling VIX higher-priced futures each day and buying at the spot price of VIX, a condition called contango which exists in about 90% of days).

Today we bought back an in-the-money expiring put that we had sold last week and rolled it over to next week.

I hope you find this ongoing demonstration to be a simple way to learn a whole lot about trading options.

Terry

Ongoing Spread SVXY Strategy – Week 2

Last week, we used the following trade to . . .

August 18, 2014

Ongoing Spread SVXY Strategy For You to Follow if You Wish

A couple of weeks ago, I put $1500 into a separate brokerage account to trade put options on an Exchange Traded Product (ETP) called SVXY. I placed positions that were betting that SVXY would not fall by more than $6 in a week (it had not fallen by that amount in all of 2014 until that date). My timing was perfectly awful. In the next 10 days, the stock fell from $87 to $72, an unprecedented drop of $15.

Bottom line, my account balance fell from $1500 to $1233, I lost $267 in two short weeks when just about the worst possible thing happened to my stock. Now I want to put $267 back in and start over again with $1500, and make it possible for you to follow if you wish.

This will be an actual portfolio designed to demonstrate one way how you can trade options and hopefully outperform anything you could expect to do in the stock market. Our goal in this portfolio is to make an average gain of 3% every week between now and when the Jan-15 options expire on January 15, 2015 (22 weeks from now).

That works out to 150% a year annualized. I think we can do it. We will start with one trade which we will make today.

I hope you find this ongoing demonstration to be a simple way to learn a whole lot about trading options.

Terry

Ongoing Spread SVXY Strategy For You to Follow if You Wish

Our underlying “stock” is an ETP called SVXY. It is a complex volatility-related instrument that . . .

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