The Terry's Tips 2016 Track Record and the Start of 2017
We currently carry out 9 portfolios at Terry’s Tips, 8 of which are available for Auto-Trade at thinkorswim (so you can follow a portfolio and never have to make a trade on your own). All except one of these portfolios can be carried out inside an IRA. Paying subscribers can follow the results of all 9 portfolios. Some newsletters only reveal their winning portfolios to all subscribers, but every trade and every position for every portfolio is open for everyone at Terry's Tips.
At the beginning of 2017, we made some changes in the strategies we employ at Terry's Tips. In the past, we primarily used a strategy we call the 10k Strategy which involves calendar and diagonal spreads on underlying stocks that we like. We were lucky enough to pick some good companies, and all 5 that we picked in 2015 and 2016 made it possible for us to double the portfolio value in an average of 13 months.
These 5 companies were Costco (COST), Starbucks (SBUX), Nike (NKE), Facebook (FB), and Johnson & Johnson (JNJ). Each of these companies moved up nicely for us, and our portfolios gained many times the percentage gains in the stock.
Unfortunately, after we doubled the portfolio values of each of these underlying stocks, many of their prices tumbled, and we lost much of what we had gained. This caused us to de-emphasize using the 10k Strategy for 2017 and beyond, and now only two of our portfolios employ that strategy. These portfolios trade options on FB and MasterCard (MA).
From 2013 through 2016, we also carried out portfolios which used a strategy of picking companies we liked (or Exchange Traded Products, ETPs), and selling long-term vertical credit spreads on them. These portfolios averaged over 40% gains per year over this period, and because of this success, we shifted most of our portfolios to this strategy at the beginning of 2017.
We carry out portfolios with differing risk levels. Our most conservative portfolio picks several blue chip companies which pay high dividends (which help protect against a big price drop), and set up option spreads which will make profits just as long as the stock does not fall more than about 10% for the year. This portfolio is designed to gain 30% for the year.
Other portfolios are designed to gain 40% - 50% per year, but the underlying stock or ETPs must do a little better than falling 10% to make those gains. Many portfolios will make these numbers as long as the stock ends up the year at any higher price than where it starts out.
As this is being updated six weeks into 2017, all 9 portfolios are showing nice gains for the year. The average portfolio has gained 17.6% for the first six weeks of the year, which is well above our original goals. Annualized, this gain works out to over 150% per year. While we don’t expect to be able to continue these wonderful results for the entire year, we are surely off to a good start toward achieving the goals we have set up for each portfolio.
Terry’s Tips has operated sample option portfolios since 2003 for their subscribers to follow or mirror in their own accounts. These portfolios are actual portfolios, and results include all commissions that an investor would pay at thinkorswim, Inc. by TD Ameritrade. Many option newsletters conveniently (for them) do not include commissions in their performance numbers. This makes their results look a lot better than they actually are because commissions are a significant cost of trading options (unlike stock trading which involves much lower commissions).
In most of these years, the option portfolios have beaten the market averages by a very large margin. In some years, the portfolios have incurred losses similar to the magnitude of the market losses.
Option trading involves leverage, and leverage works in both directions. Gains (and losses) are often greater than changes in the market. However, we have tried to minimize the losses in down years so that our losses are less than those of the markets in general, and to enjoy greater gains than the markets in good years. Most of the time, we have been successful in carrying out these goals.