For the first time ever, I will share with you the exact strategy we use in one of the 9 portfolios we carry out at Terry’s Tips. I will reveal the exact positions we have in this portfolio, their original cost, and our reasoning for putting them on. This portfolio started out with $3000 at the beginning of 2017, and has gained 83% so far. It is not our best performing portfolio, but it exceeds the average 2017 gain of 51.7% for all 9 portfolios.
Actual Positions in One Terry’s Tips Portfolio
Our Honey Badger portfolio is one of our most aggressive (least conservative). Our strategy is to select companies which rank high on the Investor’s Business Daily Top 50 List, and make the assumption that these high-momentum stocks will continue to be strong for another six or ten weeks. The stocks don’t actually have to go up at all for us to make the maximum gain on the spreads we place. We select strike prices which are just below the then-current stock price so we can tolerate a small drop in the price while we hold the positions.
Here are the exact words we published in our June 3, 2017 Saturday Report which reviews performance of all nine portfolios:
Summary of Honey BadgerPortfolio This portfolio started with $3000 in early January 2017. It will be our most aggressive portfolio. We will select companies from Investor’s Business Daily (IBD) highest-ranked momentum list (The Top 50) and sell vertical put credit spreads betting that the momentum will last at least another 2 months or so. In 2017, we have had profitable trades with NVDA, HQY, AMAT, ANET, and ULTA, and suffered a big loss on GS which fell by $30 after we placed the trade.
On May 8 when LRCX was trading at $152:
Buy To Open (BTO) 3 LRCX 16Jun17 145 puts (LRCX170616P145)
Sell To Open (STO) 3 LRCX 16Jun17 150 puts (LRCX170616P150) for a credit of $1.90 (selling a vertical)
If LRCX ends up above $150 on June 16, this spread will gain $562.50 after commissions on an investment of $937.50, or 60% (360% annualized)
On May 11 when AVGO was trading at $230:
BTO 4 AVGO 23Jun17 220 puts (AVGO170623P220)
STO 4 AVGO 23Jun17 225 puts (AVGO170623P225) for a credit of $1.62 (selling a vertical) If ULTA ends up above $225 on June 23, this spread will gain $638 after commissions on an investment of $1362, or 47% (281% annualized)
On May 11 when ULTA was trading at $300:
BTO 4 ULTA 16Jun17 290 puts (ULTA170616P290)
STO 4 ULTA 16Jun17 295 puts (ULTA170616P295) for a credit of $1.90 (selling a vertical)
If ULTA ends up above $295 on June 17, this spread will gain $750 after commissions on an investment of $1250, or 60% (360% annualized)
Results for the week: With AVGO (at $254.53) up $13.32 (5.5%), LRCX (at $158.74) up $3.62 (2.3%) and ULTA (at $311.47) up $9.07 (3.0%), for the week, the portfolio gained $810 or 17.3%. The big gain this week came about because of the surge in AVGO which makes the spread almost certain to make the maximum gain when it expires in three weeks. All three stocks in this portfolio are comfortably above the price then need to be to achieve the maximum gain. If they remain above the strike of the option we have sold, we will pick up another $180 in 3 weeks. This will make the gain for the first six months of the year a nice 88% (after commissions, of course).
Since the IBD Top 50 list is such an important source for this portfolio, we keep a careful watch on the stocks which are added on to the list each week and which ones are deleted. Over time, we hope to determine whether deletions might be good prospects for bearish spreads. Momentum often works in both directions, and perhaps stocks which had strong upward momentum will have strong downward momentum when IBD determines that the upward trend has ended.
Here are the changes we reported to our subscribers this week:
Changes to Investor’s Business Daily (IBD) Top 50 This Week:
We hope you enjoyed this peek at one of our portfolios, and the strategy we use in this portfolio. While we know that lots of newsletters out there are making all sorts of great promises about how wonderful their performance is, we don’t know of a single one which will reveal all their trades and is doing anywhere near what we have done. Our results include all commissions as well (most newsletters conveniently ignore commissions to make their results look better). We invite you to come on board and share in our success.