Terry's Tips Stock Options Trading Blog
September 30th, 2016
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 . . .
Tags: Calendar Spreads, Calls, diagonal spreads, Earnings Announcement, Earnings Option Strategy, Earnings Play, IBM, implied volatility, Monthly Options, Portfolio, Profit, Terry's Tips, thinkorswim, VIX, Volatility, Weekly Options
Posted in Earnings Announcement Options Strategy, Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options |
September 21st, 2016
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.
Tags: Auto-Trade, Calendar Spreads, Calls, dividend, Earnings Option Strategy, ETF, Ex-Dividend, Monthly Options, Portfolio, Profit, profits, Puts, Risk, SPY, Stocks vs. Stock Options, Terry's Tips, thinkorswim, VIX, Volatility, Weekly Options
Posted in Monthly Options, SPY, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options |
September 7th, 2016
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
Tags: Calendar Spreads, Facebook
Posted in Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options |
September 1st, 2016
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 check out the feasibility of buying spreads at different strike prices in an effort to reduce risk.
Terry
Calendar Spreads Tweak #1: First, let’s look at a typical calendar spread on Facebook (FB). Last Friday, when FB was trading about $124.20, we bought 5-month-out 20Jan17 calls and sold one-month-out 30Sep16 calls. The spread would cost $5.43 ($543), and this is what the risk profile graph looked like:
Tags: Bullish Options strategies, calendar spread, Calls, Face Book, FB, horizontal spread, Monthly Options, Profit, profits, Puts, reducing risk, Risk, Terry's Tips, thinkorswim, time spread, VIX, VXX, Weekly Options
Posted in Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, VXX, Weekly Options |
August 25th, 2016
This week I would like start an ongoing discussion about one of my favorite option plays. It is called a calendar spread. It is also known as a time spread or a horizontal spread. But most people call it a calendar because that’s where you focus much of your attention while you hold this kind of a spread. On a specific date on the calendar, you discover whether you made or lost money since you first bought the calendar spread. In the next few blogs, I will discuss all sorts of variations and permutations you can make with calendar spreads, but today, we will focus on a bare bones explanation of the basic spread investment.
Terry
All About, or at Least an Introduction to Calendar Spreads
A calendar spread consists of the simultaneous purchase of one option (either a put or a call) and the sale of another option (either a put or call), with both the purchase and the sale at the same strike price, and the . . .
Tags: Auto-Trade, Bearish Options Strategies, Bullish Options strategies, Calendar Spreads, Calls, diagonal spreads, ETF, implied volatility, LEAPS, Monthly Options, NKE, Portfolio, Profit, Puts, Risk, Stocks vs. Stock Options, Terry's Tips, thinkorswim, VIX, Volatility, Weekly Options
Posted in Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options |
August 15th, 2016
This week I would like discuss a little about the differences between buying stock and trading options. I would also like to tell you a little about a specific recommendation I made to paying Terry’s Tips subscribers this weekend in my weekly Saturday Report.
Terry
The Difference Between Buying Stock and Trading Options
If the truth be known, investing in stocks is pretty much like playing checkers. Any 12-year-old can do it. You really don’t need much experience or understanding. If you can read, you can buy stock. And you probably will do just about as well as anyone else because it’s basically a roulette wheel choice. Most people reject that idea, of course. Like the residents of Lake Wobegone, stock buyers believe that they are all above average – they can reliably pick the right ones just about every time.
Trading options is harder, and many people recognize that they probably aren’t . . .
Tags: Auto-Trade, Calendar Spreads, Calls, Credit Spreads, diagonal spreads, ETP, LEAPS, Monthly Options, Portfolio, Profit, profits, Puts, Risk, Stocks vs. Stock Options, Terry's Tips, thinkorswim, Volatility, Weekly Options
Posted in 10K Strategies, Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options |
August 8th, 2016
This week I would like to outline the basic stock option strategy we use at Terry’s Tips where we have created eight portfolios each of which is traded in an actual separate account and is available for Auto-Trade at TDAmeritrade/thinkorswim. Terry’s Tips subscribers can have every trade in these portfolios placed automatically for them in their own thinkorswim accounts through their free Auto-Trade service.
Enjoy the full report.
Terry
Historical Performance of 10K Strategy Stock-Based Portfolios: At Terry’s Tips, we call our options strategy the 10K Strategy. We like to think of it as shorter than a marathon but longer than a sprint. Most people who trade options seem to prefer sprints, i.e., short-term speedy wins (or losses). The basic underlying idea of our 10K Strategy is to . . .
Tags: Auto-Trade, Calendar Spreads, Calls, COST, Credit Spreads, diagonal spreads, ETF, FB, implied volatility, JNJ, Monthly Options, NKE, Portfolio, Profit, Puts, Risk, Stocks vs. Stock Options, Terry's Tips, thinkorswim, Volatility, Weekly Options
Posted in 10K Strategies, Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options |
August 1st, 2016
Last week, Facebook (FB) announced earnings which were triple the year-earlier results and were 88% higher than analyst expectations, but the stock barely budged from where it was the day before the announcement. Option players could celebrate, however. The actual portfolio at Terry’s Tips where we trade FB options gained 45.8% for the week. We have a lot of happy subscribers who follow this portfolio either on their own or through the Auto-Trade service at thinkorswim.
As good as 45% for a single week might be, you could have done even better if you had followed a trade I told you about 2 ½ months ago. That is the story I would like to share with you today.
Happy trading.
Terry
Update on Facebook Earnings Announcement Play
On May 11, 2016, I told you about two trades I was making in my personal account. You can see the entire blog which explains my thinking on our blog page. Here they are:
Today, I bought these calendar spreads on FB when the stock was trading . . .
Tags: Auto-Trade, Calendar Spreads, Calls, Credit Spreads, diagonal spreads, Earnings Announcement, Earnings Option Strategy, Earnings Play, Facebook, FB, implied volatility, Monthly Options, Portfolio, Profit, Puts, Risk, Stocks vs. Stock Options, Terry's Tips, thinkorswim, Weekly Options
Posted in Earnings Announcement Options Strategy, Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options |
July 7th, 2016
A little over a week ago, I told you about trades I was making in advance of Nike’s earnings announcement. Lots of things didn’t quite work out the way I had expected they would, but I still managed to make over 50% for the week on my trades. There were some good learning experiences concerning how to trade out of calendar spreads once the announcement has been made. You need to tread water until the short options you sold expire and you can close out the spreads, and that can present some challenges.
Today I would like to share those learning experiences with you in case you make similar trades prior to a company’s earnings announcement.
Happy trading.
Terry
How to Trade Out of an Earnings-Related Options Play
According to Openfolio, a site where about 70,000 users share information on their investments, three out of four investors lost money in June, with an average return of -0.10%. This compares to the results of the Terry’s Tips’ Auto-Traded portfolios where 7 of 8 portfolios gained, and the average gain was 15.1%. Our only losing portfolio was a special bet that the short-term price of oil would fall. It didn’t, and we lost a little, but that was nothing compared to 4 of the portfolios which gained over 20% for the month.
One of our portfolios . . .
Tags: Auto-Trade, Calendar Spreads, Calls, Credit Spreads, diagonal spreads, Earnings Option Strategy, Monthly Options, NKE, Portfolio, Profit, profits, Puts, Risk, Terry's Tips, thinkorswim, Volatility, Weekly Options
Posted in Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options |
June 27th, 2016
The Brexit vote on Friday crushed markets throughout the world, but it was a great day for Terry’s Tips subscribers who follow the eight actual portfolios we carry out for them to follow if they wish. Our composite gain for the day was greater than 10%, and that was on a day when the Dow fell over 600 points and the market as a whole (SPY) dropped even more.
One of the portfolios we carry out is designed to protect against a market crash or correction. We call it the Better Bear. It gained 34% Friday when the markets tumbled. Friday, like many days, was one when many of us are happy that we trade options rather than simply buy or sell shares of stock.
Today, I would like to share two trades I will be placing on Monday or Tuesday. I think that there is an excellent chance that these trades could double my money in a single week.
Happy trading.
Terry
100% Gain in One Week Possible With Nike Options Trade?
Nike (NKE) has fallen on hard times of late, falling from $68 in early December to $52.59 at the close on Friday. Earnings will be announced after the close on Tuesday, the 28th. Whisper numbers are about 10% higher than public estimates, and options are priced for a higher price after the announcement.
I am an options trader and rarely ever buy stock. I really don’t know if Nike will go up or down after the announcement, but there are some interesting features of the option prices that have caused me to take an interest in the company this week. As I often repeat in this newsletter, implied volatility (IV) of the option prices is the major reason that option prices are “high” or “low” compared to other option prices.
Most of the time, our basic strategy involves buying calendar spreads at a variety of strike prices. A calendar spread (also called a time spread) consists of coincidentally buying and selling either put or call options at the same strike price. The option you buy always has a longer time life than the option you sell. Our gains come from the higher decay rate of the short-term options that we have sold compared to the lower decay rate of the longer-term options that we have bought.
Most of the time, when we . . .
Tags: BREXIT, Calendar Spreads, Calls, Credit Spreads, diagonal spreads, iron condors, NKE
Posted in Monthly Options, Stock Option Trading Idea Of The Week, Stock Options Strategies, Terry's Tips Portfolios, Weekly Options |
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