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Posts Tagged ‘Bull Put Credit Spread’

Coherent Inc. (COHR) Jumps After Earnings Beat, Is There More Upside Ahead?

Tuesday, November 14th, 2017

This week we are featuring another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our portfolios to identify stocks with momentum and place spreads that profit if the momentum continues, at least a little.

I would also like to include a table which reviews how the previous 12 Trading Idea of the Week selections have worked out in the real world.  We have had an exceptionally good record.

Terry

Coherent Inc. (COHR) Jumps After Earnings Beat, Is There More Upside Ahead?

Before we discuss this week’s trading idea, I would like to review the past 12 ideas we have published here.  Each of these ideas was first distributed to Terry’s Tips’ paid subscribers in our weekly Saturday Report, and then on Monday or Tuesday, to the free newsletter subscribers such as you.  Here are the results:

Trading Idea of the week Summary Chart November 2017

Trading Idea of the week Summary Chart November 2017

The expiration prices for the 3 spreads which expire next Friday are today’s prices.  All of them are safely above the max gain price for the spread.

The only losing trade would have been the BABA one which was a minor loss.  The stock closed at $.85 below the max gain price and we had collected $.75 from the spread.  Presumably, rather than accept this small loss, we would have rolled over the vertical credit spread to a future date.  If we had, it would now look pretty good because BABA closed yesterday at $186.41, well above the max gain 177 strike.

The average gain for the 12 spreads (including the loss) was 39%.  If you had risked the same amount on 12 trades that averaged a 39% gain, you would have picked up 468% on your original investment.  While these results are a extremely encouraging, we must recognize that the past few months have been ones of generally higher stock prices across the board.  Future results might not be this great.

Now, back to our Trading Idea of the Week:

Several analysts have expressed their bullish outlook towards Coherent Inc. following their recent earnings report.  Here are two of them – Coherent price target raised to $330 from $270 at Needham and Coherent Inc. can’t be more hot.  Just reaches record high.

From a technical perspective, COHR had been consolidating mostly sideways for nearly six months ahead of last week’s earnings report.  The earnings beat triggered a gap higher for a range break and the stock held gains to close the week out at record highs.  The range break suggests the broader bullish trend has resumed.

COHR Chart November 2017

COHR Chart November 2017

*source Tradingview.com

If you agree there’s further upside ahead for Coherent Inc., consider this trade which is a bet that the stock will continue to advance at least a little over the next five weeks.

Buy To Open COHR 15Dec17 305 Puts (COHR171215P305)
Sell To Open COHR 15Dec17 310 Puts (COHR171215P310) for a credit of $2.53 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when COHR was trading near $309.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

If you use our favorite broker for this trade, tastyworks, your commission on this trade will only be $1 per opening contract ($2 per spread) (and there is no commission on closing trades, only the $.10 clearing fee).  Each contract would then yield $251 and your broker would charge a $500 maintenance fee, making your investment $249 ($500 – $251).  If COHR closes at any price above $310 on December 15, 2017, both options would expire worthless, and your return on the spread would be 101% (1150% annualized).

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

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

Arista Networks (ANET) Hits Fresh All-Time Highs, What’s Next?

Monday, November 6th, 2017

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 portfolios to spot outperforming stocks and place spreads that profit if the momentum continues.  Actually, the stock can even decline a little for the maximum gain to be made.

The 10 portfolios carried out by Terry’s Tips for its paying subscribers had its best week ever last week, gaining an average of 9.1%.  The composite portfolio average for 2017 has soared to 120%.  Isn’t it time for you to see exactly how we are doing it?

Terry

Arista Networks (ANET) Hits Fresh All-Time Highs, What’s Next?

Several analysts are optimistic about Arista Network’s future following their earnings report last week, here are two of them – Arista Networks Keeps Enjoying Soaring Sales and Why Shares of Arista Networks Are Surging Today.

ANET fell under pressure last week ahead of its earnings report, falling just over 10% in a two-day correction.  The turn lower led to a break of the 20 period daily moving average as well as a rising trendline that had been in play for nearly three months.  However, the stock recovered after the earnings beat and closed the week out at a fresh all-time high.  Although the rising trendline is no longer in play as support, the break back above it as well as the moving average signals that buyers have regained control.

 

ANET Chart Novmeber 2017

ANET Chart Novmeber 2017

*source Tradingview.com

If you agree there’s further upside ahead for Arista Networks, consider this trade which is a bet that the stock will continue to advance, or at least not decline very much over the next six weeks.

Buy To Open ANET 15Dec17 195 Puts (ANET171215P195)
Sell To Open ANET 15Dec17 200 Puts (ANET171215P200)for a credit of $2.23 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when ANET was trading near $201.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

If you use our favorite broker for this trade, tastyworks, your commission on this trade will only be $1 per opening contract ($2 per spread) (and there is no commission on closing trades, only the $.10 clearing fee).  Each contract would then yield $221 and your broker would charge a $500 maintenance fee, making your investment $279 ($500 – $221).  If ANET closes at any price above $200 on December 15, 2017, both options would expire worthless, and your return on the spread would be 79% (741% annualized).

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

BD Underlying Updates November 2, 2017

BD Underlying Updates November 2, 2017

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

Centene Corp (CNC) Poised To Break $100

Monday, October 30th, 2017

This week we are featuring another of the Investor’s Business Daily (IBD) Top 50 List companies.  We use this list in one of our portfolios to identify stocks with upward momentum and place spreads that stand to profit if the momentum continues, at least a little.

Just an update – the composite average gain for our 10 Terry’s Tips actual options portfolios has now reached 102% for 2017 (after paying all commissions, of course), and we expect some fireworks this week in our two portfolios which trade FB and MA options as both companies announce earnings after the close on Wednesday.

Terry

Centene Corp (CNC) Poised To Break $100

Several analysts are confident Centene Corp stock will continue its bullish run and break above the psychological $100.00 handle.  Here are two of them – Oppenheimer Holdings, Inc. Reaffirms “Buy” Rating for Centene Corporation (CNC) and Centene Corporation’s (CNC) Buy Rating Reiterated at Cowen and Company.

From a technical perspective, a rising trendline is in play that dates back to a low posted in late 2016.  Buyer’s protected the trendline earlier this month on a momentum driven decline which reaffirms that it is widely watched and respected.

CNC Chart October 2017

CNC Chart October 2017

*source Tradingview.com

If you agree there’s further upside ahead for Centene Corporation, consider this trade which is a bet that the stock will continue to advance at least a little over the next seven weeks.

Buy To Open CNC 5Dec17 92.50 Puts (CNC171215P92500)
Sell To Open CNC 5Dec17 95.00 Puts (CNC171215P95000) for a credit of $1.18 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when CNC was trading near $94.50.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

If you use our favorite broker for this trade, tastyworks, your commission on this trade will only be $1 per opening contract ($2 per spread) (and there is no commission on closing trades, only the $.10 clearing fee).  Each contract would then yield $116 and your broker would charge a $250 maintenance fee, making your investment $134 ($250 – $116).  If CNC closes at any price above $95 on December 15, 2017, both options would expire worthless, and your return on the spread would be 87% (1264% annualized).

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

IBD Underlying Updates October 26, 2017

IBD Underlying Updates October 26, 2017

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

44% in 46 Days From a Play on ULTA?

Tuesday, April 4th, 2017

I would like to share a trade that we made in one of our Terry’s Tips portfolios today.  By the way, we have 9 portfolios that we carry out for paying subscribers where they can see every trade (including commissions) as we make them. All of these portfolios have made positive gains so far in 2017, and the composite average has picked up 28.8% at the end of the first quarter.  Not bad compared to conventional investment results.

Enjoy today’s offering.

Terry

44% in 46 Days From a Play on ULTA?

There is a lot to like about Ulta Salon, Cosmetics & Fragrance’s (ULTA).  It has been a darling of Wall Street this year, rising about 50%.  It appears on IBD’s Top 50 list of momentum stocks.  The Motley Fool guys have written over 300 articles on the company and include it in their top three beauty stocks.  The company has a plan to add on 500 new stores, and they have exceeded earnings estimates every quarter for the past year.

The chart for the last year shows a steady climb upward, but there have been some setbacks along the way:

 

ULTA Chart April 2017

ULTA Chart April 2017

If you think the momentum might continue for about six more weeks, you might consider this trade we made on April 3rd when ULTA was trading about $285.

Buy To Open 4 ULTA 19May17 275 puts (ULTA170519P275)

Sell To Open 4 ULTA 19May17 280 puts (ULTA170519P280) for a credit limit of $1.55  (selling a vertical)

We collected $620 from this trade, less commissions of $10 at the rate Terry’s Tips  subscribers pay at thinkorswim.  A maintenance requirement of $2000 will be assessed by the broker, less the $610 net we collected, making it a $1390 investment.  This would be the maximum loss if the stock ended up below $275 on May 19th.  If it is at any price above $280 on that day, it works out to a 44% gain for the 46 days we will have to wait.

The stock can fall about $5 and we will still make the maximum gain. While this might not be much downside protection, it is surely a lot better deal than owning the stock where even a dollar drop in the stock will result in a loss for the period.

If the stock does fall below $280 near the end of the six-week period, we would probably roll out the spread to a future time period, a tactic that will give us a little more time for it to rise above $280.  If that becomes necessary, we will send you a note explaining the action we took.

As with any investment, you should do your own research on the fundamentals of any stock or options you buy, and you should only be risking money that you can truly afford to lose.

Happy trading.

Terry

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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.

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