from the desk of Dr. Terry F Allen

Skip navigation

Member Login  |  Contact Us  |  Sign Up

802-877-8330

Archive for the ‘Weekly Options’ Category

Gaga for Google … er, Alphabet (GOOGL)

Monday, April 12th, 2021

After popping 7% following its last earnings report in early February, GOOGL traded sideways through the end of March. April has been another story, however, as the stock has gained 10% in just six trading days to hit an all-time high. Over the longer term, GOOGL has been a beast, having more than doubled off the March 2020 low. And why not, given its dominant position in the search and online advertising space.

The recent price action follows a pattern GOOGL has exhibited following recent earnings reports – a quick pop after earnings followed by a trading range or a slight drift higher. The company reports earnings on April 27, so a repeat of recent history bodes well for the stock’s intermediate-term outlook.

GOOGL Chart April 2021

GOOGL Chart April 2021

If you agree that GOOGL will continue its uptrend through earnings on April 27, consider the following trade that relies on the stock remaining above $2200 through expiration in six weeks.

Buy to Open GOOGL 21May21 2190 Put (GOOGL210521P2190)
Sell to Open GOOGL 21May21 2200 Put (GOOGL210521P2200) for a credit of $3.50 (selling a vertical)

This credit is $0.10 less than the mid-point of the option spread when GOOGL was trading at $2270. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $348.70. This trade reduces your buying power by $1000 and makes your net investment $651.30 ($1000 – $348.70).  If GOOGL closes above $2200 on May 21, both options will expire worthless and your return on the spread would be 54% ($348.70 / $651.30).

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Adobe (ADBE) Accelerates Uptrend

Monday, April 5th, 2021

On March 23, ADBE reported earnings that easily beat estimates on both revenue and profits. Moreover, the company raised earnings and revenue guidance for the fiscal year. In response, several analysts raised their price targets. Despite the positive news, the stock price was sluggish in the two days following the report. Perhaps that was a response to the 10% rally that began two weeks before earnings.

After those two days, however, the stock resumed its winning ways, gaining ground in four of the next five days. In the process, ADBE crossed above its 50-day and 200-day moving averages. In addition, the 50-day is rolling over into an uptrend for the first time since late October. The stock is now on a 15% rally off the March 8 bottom with no areas of resistance until the 505 level, the site of highs in November, December and January. That leaves room for another 5% of upside.

ADBE Chart April 2021

ADBE Chart April 2021

If you agree that ADBE will stay above its 50-day and 200-day moving averages, consider the following trade that relies on the stock remaining above $475 through expiration in seven weeks.

Buy to Open ADBE 21May21 470 Put (ADBE210521P470)
Sell to Open ADBE 21May21 475 Put (ADBE210521P475) for a credit of $1.90 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when ADBE was trading above $483. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $188.70. This trade reduces your buying power by $500 and makes your investment $311.30 ($500 – $188.70).  If ADBE closes above $475 on May 21, both options will expire worthless and your return on the spread would be 61% ($188.70 / $311.30).

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $188.70. This trade reduces your buying power by $500 and makes your investment $311.30 ($500 – $188.70).  If DRI closes above $145 on May 21, both options will expire worthless and your return on the spread would be 61% ($188.70 / $311.30).

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Darden Restaurants (DRI) Earnings Keep Rally Going

Monday, March 29th, 2021

On Thursday, DRI – whose brands include Olive Garden, Longhorn Steakhouse and The Capital Grille – reported earnings that blew out expectations on both revenue and profits. The company also announced that its dividend would more than double along with a $500 million share repurchase program. The news was warmly greeted by the Street, which showered the dine-in chain conglomerate with a slew of target price increases that ranged as high as $165 (the stock closed Friday at $149). The shares gained more than 11% in the two days following the earnings news, hitting yet another all-time high on Friday.

To say DRI is in rally mode would be a gross understatement. Since bottoming last April, the stock has rocketed 245% higher. Already this year, DRI has gained 25%. The rally has proceeded largely along DRI’s 20-day moving average, with the 50-day moving average lending support on pullbacks. With strong fundamentals in place and a recent uptick in same-store sales, there’s ample reason to believe the rally should continue as customers return to DRI’s varied dining rooms.

DRI Chart March 2021 - Earnings Beat Expectations

DRI Chart March 2021

If you agree that DRI’s rally has legs, consider the following trade that relies on the stock remaining above $145 through expiration in eight weeks.

Buy to Open DRI 21May21 140 Put (DRI210521P140)
Sell to Open DRI 21May21 145 Put (DRI210521P145) for a credit of $1.90 (selling a vertical)

This credit is $0.05 less than the mid-point of the option spread when DRI was trading just below $149. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $188.70. This trade reduces your buying power by $500 and makes your investment $311.30 ($500 – $188.70).  If DRI closes above $145 on May 21, both options will expire worthless and your return on the spread would be 61% ($188.70 / $311.30).

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Starbucks (SBUX) is Stepping Higher

Monday, March 22nd, 2021

SBUX received an upgrade and price target increase from Wedbush on Friday. The analyst believes the coffee purveyor will exceed its 2021 earnings-per-share range as it better adapts to the pandemic environment with lower drive-thru wait times. Moreover, the company is positioning for a post-COVID world with an enhanced menu that should leverage its strength in China and the U.S.

Despite the endorsement, the stock dropped more than 1% to log its third straight losing day after hitting an all-time high on Tuesday. But the intermediate-term pattern shows a series of higher highs and lows for the past three months. If this pattern holds, the current decline should find a bottom in the 104-105 area, which is also the site of the 50-day moving average.

SBUX Chart March 2021

SBUX Chart March 2021

If you agree that SBUX’s stairstep uptrend will continue, consider the following trade that relies on the stock remaining above $105 through expiration in four weeks.

Buy to Open SBUX 16Apr21 100 Put (SBUX210416P100)
Sell to Open SBUX 16Apr21 105 Put (SBUX210416P105) for a credit of $1.35 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when SBUX was trading at $106.34. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $133.70. This reduces your buying power by $500 and makes your investment $366.30 ($500 – $133.70).  If SBUX closes above $105 on April 16, both options will expire worthless, and your return on the spread would be 37% ($133.70 / $366.30).

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Sea Limited (SE) is Full Steam Ahead

Monday, March 15th, 2021

SE is an online gaming and multimedia entertainment company based in Singapore. The company reported earnings in early March that missed estimates on earnings but beat on revenue on a 72% increase from a year earlier while Q4 bookings more than doubled. The stock initially popped following the day of the report but finished flat. SE was then caught up in the tech pullback that pulled the shares 28% lower in just three weeks.

That’s the bad news. The much better news is that the shares found solid support at their 20-week moving average, a trendline that was the site of a reversal higher almost exactly a year ago. The 20-week has been instrumental in guiding the stock on a monster rally that has produced an 8-fold increase in the past year. The recent correction, while dramatic, appears to be done as the stock has gained 14% off the bottom in just the past four days. In short, the rally remains intact and looks to have legs.

SE Chart March 2021 - Huge Q4 Revenue

SE Chart March 2021

If you agree that SE’s uptrend will continue, consider the following trade that relies on the stock remaining above $220 through expiration in five weeks.

Buy to Open SE 16Apr21 210 Put (SE210416P210)
Sell to Open SE 16Apr21 220 Put (SE210416P220) for a credit of $3.90 (selling a vertical)

This credit is $0.10 less than the mid-point of the option spread when SE was trading at $235. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $388.70. This reduces your buying power by $1,000 and makes your investment $611.30 ($1,000 – $388.70).  If SE closes above $220 on April 16, both options will expire worthless, and your return on the spread would be 63% ($388.70 / $611.30), or 611% annualized.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Kohls (KSS) Solid Earnings Keeps Rally Alive

Monday, March 8th, 2021

It wasn’t that long ago that KSS was given up for dead. At the bottom of last year’s plunge in late March, the stock bottomed out below $11. Retail was in trouble. Today, the stock is up five-fold after a blowout earnings report this past week. Earnings more than doubled the analyst estimate. And though revenue declined, the final tally beat estimates as well. And earnings in the year ahead also exceeded analyst expectations.

Despite KSS’s recent performance, the analyst community remains skeptical. While there were several target prices increases, the new prices were not that far from the current price. Moreover, there were no upgrades. Just a third of the covering analysts rate KSS a buy, which is hard to justify given that the stock is up 36% this year alone (SPY is up less than 3%). As analysts eventually warm to the shares, there is plenty of room for future upgrades that could give the stock a boost.

KSS’s chart shows the 20-day moving average as the primary support trendline. In fact, there have been just three daily closes below the 20-day in the past four months. Note that the short strike of our credit spread (red line below) lies below the 20-day, so the stock would have to pierce this support for the spread to move into the money.

KSS Chart March 2021 - Post Earnings Options

KSS Chart March 2021

If you agree KSS’s uptrend will continue, consider the following trade that relies on the stock remaining above $52.50 through expiration in six weeks.

Buy to Open KSS 16Apr21 50 Put (KSS210416P50)
Sell to Open KSS 16Apr21 52.5 Put (KSS210416P52.5) for a credit of $0.85 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when KSS was trading at $55.69. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $83.70. This reduces your buying power by $250 and makes your investment $166.30 ($250 – $83.70).  If KSS closes above $52.50 on April 16, both options will expire worthless, and your return on the spread would be 50% ($83.70 / $166.30), or 436% annualized.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Dell Technologies (DELL) Earnings Keep Uptrend Intact

Monday, March 1st, 2021

DELL reported quarterly results Thursday after the bell that easily beat expectations on both revenue and earnings. The company shipped more than 50 million PCs in 2020, a record high, taking advantage of the higher demand for home-based activities amid the pandemic. In response, several analysts raised their price targets, ranging up to $101, $20 higher than Friday’s close.

The strong results kept DELL’s stock price headed in the right direction. For the week, the stock ticked slightly higher, which is impressive given the Nasdaq’s 5% plunge. In the intermediate term, the stock has been riding along its rising 20-day moving average since crossing above it more than three months ago. Note that the short strike of our credit spread (red line below) lies below the 20-day and the recent lows near $78, so this dual support would need to break for the spread to move into the money.

DELL Chart March 2021 - Record High

DELL Chart March 2021

If you agree DELL’s uptrend will continue, or at least stay above $78, consider the following trade that relies on the stock remaining above $77.50 through expiration in seven weeks.

Buy to Open DELL 16Apr21 75 Put (DELL210416P75)
Sell to Open DELL 16Apr21 77.5 Put (DELL210416P77.5) for a credit of $0.90 (selling a vertical)

This credit is $0.03 less than the mid-point of the option spread when DELL was trading near $81. Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $88.70. This reduces your buying power by $250 and makes your investment $161.30 ($250 – $88.70).  If DELL closes above $77.50 on April 16, both options will expire worthless, and your return on the spread would be 55% ($88.70 / $161.30), or 408% annualized.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Taiwan Semiconductor (TSM) Booming as Chip Shortage Continues

Monday, February 22nd, 2021

TSM is in a sweet spot. It’s one of the few manufacturers of chips amid a worldwide shortage, especially in the automotive industry. TSM is a true manufacturer that provides chips to several semiconductor companies that have turned to outsourcing their production needs.

The stock is already up 25% this year as it rides along the support of its 20-day moving average. In fact, the stock has closed just one day below this trendline since early November. The shares pulled back this week but found support once again at the 20-day on Friday. With strong support and a full production pipeline, TSM seems unstoppable. And we’re entering a bullish position on a pullback.

TSM Chart February 2021- Rally continues

TSM Chart February 2021

If you agree TSM’s rally will continue, consider the following trade that relies on the stock remaining above $135 through expiration in four weeks.

Buy to Open TSM 19MAR21 130 Put (TSM210319P130)
Sell to Open TSM 19MAR21 135 Put (TSM210319P135) for a credit of $2.00 (selling a vertical)

This credit is $0.05 less than the mid-point of the option spread when TSM was trading near $137.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $198.70. This reduces your buying power by $500 and makes your investment $301.30 ($500 – $198.70).  If TSM closes above $135 on March 19, both options will expire worthless, and your return on the spread would be 66% ($198.70 / $301.30), or 857% annualized.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

Cloudflare (NET) Ready to Resume Uptrend after Strong Earnings Report

Monday, February 15th, 2021

Cloudflare (NET), a cloud platform and cybersecurity services company, reported earnings after the bell on Thursday that beat analyst estimates for revenue, earnings and guidance. In response, several analysts raised their price targets to a range between $88 and $105 (the stock closed at $85.95 on Friday).

Despite the positive earnings and target price increases, the stock dropped nearly 6%. But it stayed above its rising 50-day moving average, a trendline that has supported the stock throughout a yearlong rally that has seen the stock more than quadruple. With the positive earnings, price target increases and technical support in place, the rally should continue.

NET Chart February 2021

NET Chart February 2021

If you agree NET’s rally will continue, consider the following trade that relies on the stock remaining above $85 through expiration in five weeks.

Buy to Open NET 19MAR21 80 Puts (NET210319P80)
Sell to Open NET 19MAR21 85 Puts (NET210319P85) for a credit of $2.35 (selling a vertical)

This credit is $0.05 less than the mid-point of the option spread when NET was trading near $86.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $233.70. This trade reduces your buying power by $500 and makes your investment $266.30 ($500 – $233.70).  If NET closes above $85 on March 19, both options will expire worthless, and your return on the spread would be 88% ($233.70 / $266.30), or 915% annualized.

As with all investments, you should only make option trades with money that you can truly afford to lose.

Happy trading,

Terry

ServiceNow (NOW) Shows a Renewal of Upward Momentum After Breaking to an All-Time High

Monday, February 8th, 2021

This week we are looking at another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our options portfolios to spot outperforming stocks and place option spreads that take advantage of the momentum.

ServiceNow pushed upward to a fresh all-time high in the past week. The following two articles outline some of the reasons that are driving the growth – ServiceNow: The Workflow Revolution Is Happening and ServiceNow delivers strong Q4 as it expands wallet share.

Technicals

The monthly candle for NOW in January hinted of a potential pullback but the recent surge to new highs indicates otherwise. The upward trend remains intact for this stock and the expectation is that dips will be bought over the near-term. A rising trendline that dates to May last year held the decline last month where a small consolidation took place showing that buyers are ready to step in on dips. Near-term support is seen at the December high of $566.75.  There is momentum behind the move in the past week which suggest the rally will continue although it would not be surprising to see brief period of sideways trading to work off overbought conditions on the smaller time frames.

NOW Chart February 2021

NOW Chart February 2021

If you agree there’s further upside ahead for NOW, consider this trade which relies on the stock remaining above $590 through the expiration in five weeks.

Buy To Open NOW 12MAR21 587.5 Puts (NOW210312P587.5)
Sell To Open NOW 12MAR21 590 Puts (NOW210312P590) for a credit of $1.38 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when NOW was trading near $590.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread.  Each spread would then yield $136.70. This reduces your buying power by $250 and makes your investment $113.30 ($250 – $136.70).  If NOW closes at any price above $590 on March 12, both options will expire worthless, and your return on the spread would be 121% ($136.70 / $113.30), or 1380% annualized.

Changes to Investor’s Business Daily (IBD) Top 50 This Week:

IBD Underlying Updates February 6, 2021

IBD Underlying Updates February 6, 2021

We have found that the Investor’s Business Daily Top 50 List has been a reliable source of stocks that are likely to move higher in the short run.  Recent additions to the list might be particularly good choices for this strategy, and deletions might be good indicators for exiting a position that you might already have on that stock.

As with all investments, you should only make option trades with money that you can truly afford to lose.

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