Monthly Archives: June 2022

No Garden Party

Darden Restaurants (DRI) reported earnings this week that beat on both revenue and profits. But the owner of such popular chains as Olive Garden, LongHorn Steakhouse and Capital Grille was beset by higher food, beverage and labor costs even as customers are more comfortable eating out again.

Analysts weighed in with a plateful of target price decreases, although there were no rating downgrades. This has been common for most stocks, as analysts re-adjust their targets amid the 2022 swoon. Nevertheless, some targets are now barely above the current share price, which does not inspire confidence about DRI’s near-term price action.

The stock reacted with a small increase on Thursday and then popped 3.6% on Friday. But most stocks surged on Friday, so it doesn’t appear that earnings gave DRI a boost. Although the stock is up 8% off a 52-week low hit last week, it is bumping into its 20-day moving average at the 120 level (red line in chart). The 50-day moving average lies overhead at the 125 level (blue line). Although DRI has managed to overtake the 50-day at times, it ultimately retreats into a tailspin. Given this history, we’re using a bearish call credit spread with the short call strike (green line) sitting right on the 50-day.

If you agree that DRI will continue its overall downtrend, consider the following trade that relies on the stock staying below $125 through expiration in eight weeks.  

Buy to Open DRI 19Aug 130 call (DRI220819C130)
Sell to Open DRI 19Aug 125 call (DRI220819C125) for a credit of $1.50 (selling a vertical)

This credit is $0.05 less than the mid-point of the option spread when DRI was trading at $120. Unless the stock drops quickly from here, you should be able to get close to this amount.

Your commission on this trade should be no more than $1.30 per spread.  Each spread would then yield $148.70. This trade reduces your buying power by $500 and makes your net investment $351.30 ($500 – $148.70) for one spread.  If DRI closes below $125 on August 19, both options will expire worthless and your return on the spread would be 42% ($148.70/$351.30).

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

Success Stories

I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins

June 24, 2022 Terry’s Tips Trade Alert  – Earnings Eagle  Portfolio

June 24, 2022 Terry’s Tips Trade Alert  – Earnings Eagle  Portfolio

We are raising delta:


BTC 1 SPY 01Jul22 365 put (SPY220701P365)
STO 1 SPY 01Jul22 384 put (SPY220701P384) for a credit of $3.50 (selling a vertical) (100%) 

BTO 1 SPY 19Aug22 390 put (SPY220819P390) 
STC 1 SPY 19Aug22 371 put (SPY220819P371) for a debit of $6.90 (buying a vertical) (100%)  

BTC 1 SPY 01Jul22 383 call (SPY220701C383) 
STO 1 SPY 01Jul22 393 call (SPY220701C393) for a debit of $5.05 (buying a vertical) (100%) 


Be prepared to change this (these) price limit(s) by $.05 or more in order to get an execution.

Happy trading.

Terry

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

Success Stories

I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins

June 22, 2022 Terry’s Tips Trade Alert – Boomer’s Revenge Portfolio

June 22, 2022 Terry’s Tips Trade Alert – Boomer’s Revenge Portfolio

We are lowering a long put strike and adding a call spread to increase delta: 


BTO 1 IWM 19Aug22 160 put (IWM220819P160) 
STC 1 IWM 19Aug22 180 put (IWM220819P180) for a credit of $9.55 (selling a vertical) (100%)

BTO 1 IWM 19Aug22 156 call (IWM220819C156)
STO 1 IWM 24Jun22 168 call (IWM220624C168) for a debit of $14.80 (buying a diagonal)


Be prepared to change this (these) price limit(s) by $.05 or more in order to get an execution.

Happy trading.

Terry

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

Success Stories

I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins

Channel This

Roku (ROKU) is a stock many believe is in play as a takeover candidate. Netflix and Disney are potential suitors, among others. Whatever the rumor or sentiment, the stock has been flat for the past seven weeks, which is saying something. In fact, since April 27, ROKU is down 2.7% while QQQ has fallen more than 13%.

There’s no denying that ROKU has been a spectacular flop for the past year. The shares are down a whopping 83% from their July 2021 high. But the stock has held up well over the past couple of months with takeover rumors in the air. It may not be advancing, but it’s not falling either. Moreover, the stock appears to have found solid support in the 72-73 area, the site of a two-year low.

One way to see how the market feels about a stock is by looking at equidistant out-of-the-money put and call prices. Currently, calls are trading for more than their corresponding puts, suggesting that the market sees more risk to the upside. That is highly unusual in this market, where most everything has richer put prices. We are therefore trading a put credit spread with the short put strike below the recent two-year low level. 

If you agree that ROKU is in play and will continue sideways at worst, consider the following trade that relies on the stock staying above $70 through expiration in six weeks. Note that ROKU is scheduled to report earnings the day before expiration.

Buy to Open ROKU 29Jul 65 put (ROKU220729P65)
Sell to Open ROKU 29Jul 70 put (ROKU220729P70) for a credit of $1.50 (selling a vertical)

This credit is $0.05 less than the mid-point of the option spread when ROKU was trading at $82.42. Unless the stock surges quickly from here, you should be able to get close to this amount.

Your commission on this trade should be no more than $1.30 per spread.  Each spread would then yield $148.70. This trade reduces your buying power by $500 and makes your net investment $351.30 ($500 – $148.70) for one spread.  If ROKU closes above $70 on July 29, both options will expire worthless and your return on the spread would be 42% ($148.70/$351.30).

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

Success Stories

I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins