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The Terry's Tips Track Record

 

The Terry's Tips 2016 Track Record for the First Seven Months

We currently carry out 11 portfolios at Terry’s Tips.   Paying subscribers can follow the results of all 11 (some newsletters only reveal their winning portfolios to all subscribers). Eight of the 11 portfolios can be traded through Auto-Trade at thinkorswim (so you can follow a portfolio and never have to make a trade on your own).  The 3 portfolios that cannot be Auto-Traded are simple to do on your own (usually only one trade needs to be made for an entire year).

Four of our portfolios are based on underlying stocks we like.  Our portfolio based on Costco (COST) was started in June of 2013 and gained 197% through September of 2015 while the stock rose 31%.  Our Starbucks (SBUX) options trading gained 195% for the first 9 months of 2015 while the stock rose 43%. Our portfolio based on Nike (NKE) was started in July of 2013 and gained 138% since then while the stock has gained 32%.  Our portfolio based on Facebook (FB) was started with $6000 in October 2015 and was worth just under $10,000 at the end of July 2016, eight months after its start.  This is the only one of the four portfolios that has not yet doubled in value, but a full year has not yet elapsed.

We set up a new $5000 portfolio to trade options on Johnson & Johnson (JNJ) in November 2015 and in July 2016, eight months later, the portfolio was worth over $10,000 and we declared a 2-for-1 split so that new subscribers could follow the portfolio for a starting investment of $5000.

Two of our portfolios are not available for Auto-Trade, but they are easy to follow on your own because they involve making a single trade at the beginning of the year and just waiting for the year to elapse.  These portfolios are designed for the options to expire worthless at the end of the year so no closing trades are necessary.  One of these portfolios will make 45% in 2016 if Facebook (FB) closes at any price above $105 (current price about $124) and Johnson & Johnson (JNJ) closes above $95 (current price about $125).  Both stocks could fall by a large amount and the full 45% gain will materialize.

We have been running the second of these portfolios for three years.  In 2014, it gained 20%.  While this was disappointing for us, it was still a lot better than most conventional investments.  In 2015, it gained 31%.  Through July of 2016, the portfolio had gained 52% and was on target to make 71% after commissions for the year (this gain will come about if the underlying stock (a volatility-based ETP) is at any price above $30, and it was at $65 at the end of July, so the 71% seems to be a sure thing for 2016).

Paying subscribers can choose to follow any (or none) or all of eight actual portfolios, either on their own or through Auto-Trade.  Some of our portfolios have specific goals.  One is a bearish portfolio that is designed to protect against other stock investments a subscriber might have.  This portfolio was started in June 2016 and has lost money since the market has risen steadily since it was started.  Another is based on the price of oil eventually recovering, it has also lost money in 2016 because the price of oil has fallen since we started the portfolio (the long positions in this portfolio don’t expire until 2018 so we have plenty of time to recover our losses).

The Long-Term Track Record at Terry's Tips

 

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.

 

Terry's Tips Stock Options Trading Blog

September 30, 2016

IBM Pre-Announcement Play

IBM announces earnings on October 17, less than three weeks from now. I would like to share with you a strategy I used today to take advantage of the extremely high option prices which exist for the option series that expires on October 21, four days after the announcement. I feel fairly confident I will eventually make over 100% on one or both of these trades before the long side expires in six months.

Terry

IBM Pre-Announcement Play

One of my favorite option strategies is to buy one or more calendar spreads on a company that will be announcing earnings in a few weeks. The option series which expires directly after the announcement experiences an elevated Implied Volatility (IV) relative to all the other option series. A high IV means that those options are relatively expensive compared to all the other options that are trading on that stock.

IV for the post-announcement series soars because of the well-known tendency for stock prices to fluctuate far more than usual once the announcement is made. It may go up if investors are pleased with the company’s earnings, sales, or outlook, or it may tumble because investors were expecting more. While there is some historical evidence that the stock usually moves in the opposite direction that it did in the week or two leading up to the announcement, it is not compelling enough to always bet that way.

IBM has risen about $5 over the last week, but it is trading about equal to where it was two weeks ago, so there is no indication right now as to what might happen after the announcement.

IBM has fluctuated by just under 4% on average over the last few announcement events. That would make an average of $6 either way. I really have no idea which way it might go after this announcement, but it has been hanging out around it/s current level (just under $160) for a while, so I am planning to place my bet around that number

In the week leading up to . . .

September 21, 2016

Calendar Spreads Tweak #4

Today I would like to discuss how you can use calendar spreads for a short-term strategy based around the date when a stock goes ex-dividend. I will tell you exactly how I used this strategy a week ago when SPY paid its quarterly dividend.

Terry

Calendar Spreads Tweak #4

Four times a year, SPY pays a dividend to owners of record on the third Friday of March, June, September, and December. The current dividend is about $1.09. Each of these events presents a unique opportunity to make some money by buying calendar spreads using puts to take advantage of the huge time premium in the puts in the days leading up to the dividend day.

Since the stock goes down by the amount of the dividend on the ex-dividend day, the option market prices the amount of the dividend into the option prices. Check out the situation for SPY on Wednesday, September 14, 2016, two days before an expected $1.09 dividend would be payable. At the time of these prices, SPY was trading just about $213.70.

September 7, 2016

Calendar Spreads Tweak #2

This week we will continue our discussion of a popular option spread – the calendar spread which is also called a time spread or horizontal spread. We will compare the expected costs and potential returns if you select different time periods for the long and short sides of the calendar spread.

Terry

Calendar Spreads Tweak #2

First, let’s look at a typical calendar spread on Facebook (FB). Today, the stock is trading just over $130, and you might buy an at-the-money calendar spread by placing this order:

Buy To Open 1 FB 16Dec16 130 call (FB161216C130)
Sell To Open 1 FB 14Oct16 130 call (FB161014C130) for a debit of $3.75 (buying a calendar)

This spread would cost about $3.75 ($375) to buy, plus $2.50 in commissions at the rate Terry’s Tips’ subscribers pay at thinkorswim, for

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