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Tip 8 - Other Stock Option Resources

thinkorswim

thinkorswim by TD Ameritrade

thinkorswim by TD Ameritrade (thinkorswim) - Online broker specializing in stock options – Excellent software-based Options platform. Our choice as the absolute best broker for option trading.
Chicago, IL (866) 839-1100 www.thinkorswim.com

This Chicago brokerage firm with the unlikely name thinkorswim, Inc. by TD Ameritrade is our clear choice as the best of all option-friendly brokers. For openers, they have absolutely the best software. For several years, I paid over $250 a month for a service delivering real-time complete (bid-asked prices, sizes, volume, Greeks, etc.) options chain screens – it comes free at thinkorswim by TD Ameritrade, along with dozens of other software programs for the serious option trader. Even more important, our experience has shown that thinkorswim by TD Ameritrade achieves consistently better spread executions than any other broker we could find – these could save an active trader thousands of dollars each year. You may select any of several commission schedules which are equal to (or lower) than the rates charged at OptionsXpress (and other discount option brokers). But perhaps the biggest reason of all to choose thinkorswim by TD Ameritrade is their superior level of personal service – you can always talk to a real person, and there is no extra charge for orders placed on the phone. I believe that there is no good reason to choose any other broker for option trading than thinkorswim by TD Ameritrade. I am not the only person who feels this way - Barron's* ranked thinkorswim by TD Ameritrade as the #1 web-based online broker in 2006 and 2007.

*thinkorswim by TD Ameritrade firm was evaluated versus others in eight total categories including investment types that can be traded, the quality of screeners provided to sort through stocks, options, or funds, the consumer-friendliness of trading screens, overall ease-of-use and ability to be customized. thinkorswim topped the list with the highest weighted average score.

thinkorswim Disclaimer:  thinkorswim, Division of TD AMERITRADE, Inc. and Terry's Tips, Inc. are separate, unaffiliated companies and are not responsible for each other's services and products.

 


Options Graphing Software

Terrys Tips Stock Options and Trading Report

There are many options graphing software packages out there, most of which do far more than the average investor would ever need. Of course, they cost too much as well. I have found one package that I absolutely love. It does everything I want (and lots more), and is very inexpensive. Most of all, it's easy to use. What I like best about it is that once you enter your positions, you click an update button, and the current market prices are looked up for you, and the graph updated.

Each week, for each of our portfolios, I create a Risk Profile Graph like this:

risk profile terrystips.com

(Note:  This graph was created on July 25, 2009 when the Boomer’s Revenge portfolio was worth about $9,500 and the stock, SPY, was trading at $99.)

This graph lets me know what profit or loss will result from my current positions at the next expiration at each stock price. I can see that the portfolio will make about a 15% profit in a single month if the stock lands anywhere between $100 and $104 in four weeks and there will be a gain at any SPY price between $94 and $108, a range of 14 points. The graph gives me a visual reading on my risk at different stock price scenarios, and helps me decide if I should make an adjustment. Of course, I can enter the several different possible adjustments and examine the graph with those new positions before I make the actual trades.

You can purchase the Excel Option Calculator software here. It was written by a smart young man who lives in Argentina. The price is only $57.90. If you enter the Discount Code TT36, he will take off $5.00 for people who found this software through Terry’s Tips .  With this code, your net cost will be only $52.90.  I recommend it highly, and use it every day myself.


Traders Accounting

Highly recommended tax experts specializing in online trading – well versed in options

Bellevue, Washington
(800) 938-9513
Click here for Traders Accounting (Discounts for Terry's Tips Customers)

Traders Accounting comes highly recommended from many folks, including Terry’s Tips subscribers. They provide tax consulting, entity formation and 401(k) services that help you efficiently establish and maintain your trading business. Terry’s Tips customers receive $75.00 off their Tax Secrets for Traders: Home Study Course as well as discounts on other services.


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

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

Here is what the book looks like (but the good stuff is inside):

The book was originally published at $19.95. You will receive an electronic version so you can start right away, and the paperback version will be mailed to you free of shipping and handling charges. Order it today at www.Making36Percent.com (Enter the discount code TEE and your cost will be only $12.94, including shipping by First Class mail).

This could be the best investment decision you ever make. At least, you won't be risking much to learn the strategy. And it could change your investment outlook for a lifetime. Total cost, including shipping only $12.94 - www.Making36Percent.com (Enter the discount code TEE).


CBOE – Chicago Board Options Exchange

Best of all educational resources for stock options

Complete education program, list of option symbols, LEAPS, volatilities, Black-Scholes calculation module, everything you could ever need for learning about stock options. Create your own home page. Everything's free! http://www.cboe.com/Home/

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Terry's Tips Stock Options Trading Blog

January 22, 2015

How to Make 20% in one Month on Your Favorite Stock (Using Options)

This week I would like to show you the exact positions of one of the 9 portfolios we are currently carrying out for Insiders at Terry’s Tips. It involves one of my favorite places to shop, Costco, and its stock, COST. We expect to make just under 20% on this portfolio in the next four weeks, even if the stock does not go up a single penny. Welcome to the wonderful world of stock options.

Terry

How to Make 20% in one Month on Your Favorite Stock (Using Options)

The basic strategy that we carry out at Terry’s Tips is to buy longer-term options on stocks we like and sell shorter-term options against them. Since the decay rates of the shorter-term options is . . .

January 8, 2015

Try a Vertical Put Credit Spread on a Stock That You Like

This week I would like to share my thoughts about the market for 2015, and also one of my favorite option strategies when I find a stock I really like. Whenever I find a stock I particularly like for one reason or another, rather than buy the stock outright, I use options to dramatically increase the returns I enjoy if I am right (and the stock goes up, or at least stays flat).

Today I would like to share a trade that I made today in my personal account.  Maybe you would like to do something similar with a company you particularly like.

And Happy New Year – I hope that 2015 will by your best year ever for investments (even if the market falls a bit).

Terry

Try a Vertical Put Credit Spread on a Stock That You Like

First, a few thoughts about the market for 2015.  The Barron’s Roundtable (made up of 10 mostly large investment bank analysts) predicted an average 10% market gain for 2015.  None of the analysts predicted a market loss for the year.  Others have suggested that the year should be approached with more caution, however. The whopping gain in VIX in the last week of 2014 is a clear indication that investors have become more fearful of what’s ahead. The market has gained about 40% over the past two years.  The bull market has continued for 90 months, a near-record–breaking string.

The forward P/E for the market has expanded to 19, several points higher than the historical average, and 2 points above where it was a year ago.  The trailing market P/E is 22.7x compared to 14x for the 125-year average.  Maybe such high valuations are appropriate for a zero-interest environment, but that is about to change. For the first time since 2007, the Fed will not be propping up the market with their Quantitative Easing purchases. The Fed has essentially promised that they will raise interest rates in 2015.  The only question is when it will happen.

There is an old adage that says “don’t fight the Fed.”  Not only have they stopped pumping billions into the economy every month, they plan to raise interest rates this year.  Like it or not, stock market investments made in 2015 are tantamount to picking a fight with the Fed.

While the U.S. economy is strong (and apparently growing), a great number of U.S. companies depend on foreign sales for a significant share of their business, and the foreign prospects aren’t so great for a number of countries. This situation could cause domestic company earnings to disappoint, and stock prices could fall.  At the very best, 2015 seems like a good time to take a cautious approach to investing.

Even if the market is not great for 2015, surely some shares will move higher. Barron’s chose General Motors (GM) as one of its best 10 picks for 2015 and made a compelling argument for the company’s prospects.  The 3.27% dividend should insulate the company from a big down-draft if the market as a whole has a correction in 2015.

I was convinced by their analysis that GM was highly likely to move higher in 2015.  Today, with GM trading at $35.70, I placed the following trade:

Buy To Open 10 GM Jun-15 32 puts (GM150619P32)

Sell To Open 10 GM Jun-15 37 puts (GM150619P37) for a credit of $2.20  (selling a vertical)

I like to go out about six months with spreads like this to give the stock a little time to move higher.  The above trade put $2200 in my account.  There will be a $5000 maintenance requirement which is reduced to $2800 when you subtract out the amount of cash I received.  This means that my maximum loss would be $2800, and this would come about if the stock closes below $32 on June 19, 2015.

If the stock closes at any price above $37, both the long and short puts will expire worthless and I will not have to make any more trades.  If this happens, I will make a profit of $2200 (less $25 commission, or $2175) on an investment of $2800.  This works out to a gain of 77%.

In order for me to make 77% on this investment, GM only needs to go up by $1.50 (4.2%).  If it stays exactly the same on June 19th ($35.70), I will have to buy back the 37 put for a cost of $1.30 ($1300 for 10 contracts).  That would leave me with a gain of $862.50, or 30.8%.

If I had purchased shares of GM with the $2800 I had at risk, I could have bought 78 shares.  I I might have collected a dividend of $91 over the 6 months.  With my options investment, I would have gained nearly 10 times that much if the stock did not move up at all.

Bottom line, even though I am taking a greater risk with options, the upside potential is so much greater than merely buying the stock that it seems to be a better move when you find a company that looks like it will be a winner.

December 4, 2014

Further Discussion on an Options Strategy Designed to Make 40% a Month

Last week we outlined an options play based on the historical fluctuation pattern for our favorite ETP called SVXY. This week we will compare those fluctuations to the market in general (using the S&P 500 tracking stock, SPY, as the market definition). We proposed buying a vertical call spread for a one-month-out expiration date with the lower strike about 6% above the starting stock price.

The results were a little unbelievable, possibly gaining an average of 65% a month (assuming the fluctuation pattern continued into the future). If you used an outside indicator to determine which months were more likely to end up with a winning result, you would invest in just under half the months, but when you did invest, your average gain might be in the neighborhood of 152%. Your average monthly gain would be approximately the same if you only invested half the time or all the time, but some people like to increase the percentage of months when they make gains (the pain of losing always seems to be worse than the pleasure of winning).

This week we will offer a second way to bet that the stock will rise by 12.5% in about 38% of the months (as it has in the past). It involves buying a calendar spread rather than a vertical call spread (and sort of legging into a long call position as an alternative to the simple purchase of a call).

Terry

Further Discussion on an Options Strategy Designed to Make 40% a Month:

First. Let’s compare the monthly price fluctuations of SPY and SVXY. You will see that they are totally different. . . .

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

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