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Posts Tagged ‘implied volatility’

Can The Trade Desk (TTD) Continue the Upward Momentum Into Earnings?

Monday, July 22nd, 2019

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.

Terry

Can The Trade Desk (TTD) Continue the Upward Momentum Into Earnings?

TTD has had a spectacular gain in the first half of the year, check out this article which outlines four reasons why it could continue higher – Is The Trade Desk a Buy?. Also take a look at this article published by Zack’s – The Trade Desk Outpaces Stock Market Gains: What You Should Know.

From a technical perspective, TTD is testing a horizontal level that had acted as resistance in May. Just below it, there is some further support from the 50-day moving average. So far, the decline from the top in early June has not had a lot of momentum behind it. This combined with the hold above the mentioned moving average signals that the broader trend remains firmly to the upside.

TTD Chart July 2019 verticle stock options spread

TTD Chart July 2019

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

Buy To Open TTD 09AUG19 230 Puts (TTD190809P230)
Sell To Open TTD 09AUG19 235 Puts (TTD190809P235) for a credit of $2.48 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when TTD was trading near $235.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $245.50 and your broker would charge a $500 maintenance fee, making your investment $254.50 ($500 – $245.50).  If TTD closes at any price above $235 on August 9, both options would expire worthless, and your return on the spread would be 96% (1947% annualized).

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

IBD Underlying Updates July 18, 2019 Terry's Tips

IBD Underlying Updates July 18, 2019

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

Ulta Beauty (ULTA) Nears Record Highs, Will it Break Upward?

Monday, July 15th, 2019

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.

Terry

Ulta Beauty (ULTA) Nears Record Highs, Will it Break Upward?

After an impressive run in the first half of the year, several analysts still see the potential for further upside in ULTA. Take a look at what these analysts have to say – Ulta Beauty – Consensus Indicates Potential 4.2% Upside and Why Ulta Beauty Stock Gained 42% So Far in 2019.

ULTA is actually seen approaching a significant resistance level at $359. There are a few indicators that suggest that the stock will break higher from here. First, the stock posted a bullish engulfing candle in the past week. This momentum seems to suggest that ULTA is ready to continue rallying. Second, the stock held above an important support level in May that is found at $315. That level held the stock lower in 2017 and 2018. The strong presence of buyers and the steady bid from the level shows that the stock is well in demand. Lastly, when a stock lingers around a resistance level without a strong show of selling, it usually suggests an upward break. Especially when there is a strong trend in place as is the case for ULTA.

ULTA Chart July 2019 verticle spread

ULTA Chart July 2019

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

Buy To Open ULTA 16AUG19 350 Puts (ULTA190816P350)
Sell To Open ULTA 16AUG19 355 Puts (ULTA190816P355) for a credit of $2.03 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when ULTA was trading near $356.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $200.50 and your broker would charge a $500 maintenance fee, making your investment $299.50 ($500 – $200.50).  If ULTA closes at any price above $355 on August 16, both options would expire worthless, and your return on the spread would be 67% (764% annualized).

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

IBD Underlying Updates July 11, 2019 Weekly Trade Ideas

IBD Underlying Updates July 11, 2019

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

Will Monster Beverage (MNST) Continue to Rally Into Earnings?

Monday, July 8th, 2019

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.

Terry

Will Monster Beverage (MNST) Continue to Rally Into Earnings?

Zack’s recently published an article outlining reasons why they believe Monster Beverage is a good investment. Take a look at the article here – Here’s Why Monster Beverage is a Hot Investment Pick. Also, take a look at the following article which discusses the involvement of hedge funds in the stock – Did Hedge Funds Drop the Ball on Monster Beverage?

MNST is testing some resistance found at $66.25 but the recent price action appears to show strength. Indeed, the horizontal level has been holding sellers, but each decline from the level has become increasingly narrow which often is indicative of breakout potential. So far, the stock has tested the level three times. Triple tops are rare, especially in strong uptrends like the one MSNT has been experiencing as of late.

MNST Chart July 2019 Terry's Tips Weekly Trade Idea

MNST Chart July 2019

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

Buy To Open MNST 09AUG19 63 Puts (MNST190809P63)
Sell To Open MNST 09AUG19 66 Puts (MNST190809P66) for a credit of $1.12 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when MNST was trading near $66.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $109.50 and your broker would charge a $300 maintenance fee, making your investment $190.50 ($300 – $109.50).  If MNST closes at any price above $66 on August 09, both options would expire worthless, and your return on the spread would be 57% (650% annualized).

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

IBD Underlying Updates July 4, 2019 Terry's Tips Weekly Trade Idea

IBD Underlying Updates July 4, 2019

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

Consider Kirkland Lake Gold (KL), A Gold Mining Growth Stock

Sunday, November 4th, 2018

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.

Last week was a great one for the market (SPY up 2.6%) and an even better one for the Terry’s Tips 8 actual option portfolios.  Every one made gains, and the composite average picked up 11%, a record we are quite proud of.

Terry

Consider Kirkland Lake Gold (KL), A Gold Mining Growth Stock

The Investor’s Business Daily recently posted an article which started out by stating “Gold might not come to mind first when you think of growth stocks” which is very true.  Take a look at this article for the full write up and the reasoning behind why they see growth potential in this stock.  Also check out Kirkland Lake Gold Receives Consensus Rating of “Buy” from Analysts.

KL corrected lower ahead of earnings and was mostly flat following it.  The technical significance is that the stock managed to hold above a triple confluence of support derived from a rising trendline, the 50-day moving average, as well as a horizontal support level.  Also significant is the prior correction that took place in late summer that was held higher by the 200-day moving average.  These developments suggests that

bulls remain firmly in control from a technical perspective while the close proximity of the current price to support offers an attractive entry point.  It’s worth mentioning that the correlation between this stock and the price of Gold has strengthened since last month and that Gold appears to be carving out a bottom, at least a near-term one.

KL Chart November 2018

KL Chart November 2018

*source Tradingview.com

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

Buy To Open KL 21DEC18 17.5 Puts (KL181221P17.5)
Sell To Open KL 21DEC18 20 Puts (KL181221P20) for a credit of $0.78 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when KL was trading near $20.00.  Unless the stock rallies quickly from here, you should be able to get close to this amount.

Your commission on this trade will only be $2.50 per spread (the rate charged by thinkorswim for Terry’s Tips’ subscribers).  Each contract would then yield $75.50 and your broker would charge a $250 maintenance fee, making your investment $174.50 ($250 – $75.50).  If KL closes at any price above $20 on December 21, both options would expire worthless, and your return on the spread would be 43% (402% annualized).

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

IBD Underlying Updates November 1, 2018

IBD Underlying Updates November 1, 2018

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

A Carmax Spread Trade to Put the Diagonal Condor Earnings Strategy to Work

Tuesday, April 3rd, 2018

A Carmax Spread Trade to Put the Diagonal Condor Earnings Strategy to Work:

Carmax (KMX) announces earnings before the market opens on Wednesday, April 4, 2018.  If anyone would like to place the spread trade that we suggest below, the order must be placed no later than the market close on Tuesday, April 3rd.

Here are the numbers we compiled for KMX for the last eight quarters:

The prices in green are lower than the last pre-announcement price, suggesting that expectations are rising.  Most companies we tested show much many more green numbers than KNX.  Most of the time, KMX showed a high correlation between the actual results and what the stock price did after the announcement (while one might expect this would be universally true, our back-testing and personal experience has proved otherwise).  While the direction of the change for KMX was highly consistent (beating estimates resulted in a higher stock price, and vice versa), the magnitude of the change was not consistent.

In the June 2017 announcement, earnings were a whopping 23% above estimates, but the stock only gained 4% after they became public. In the next quarter, September 2017, earnings exceeded estimates by only 3% while the stock gained 10%.

KMX does not seem consistently beat or fall behind estimates.  This is a different pattern than we see in many companies who low-ball guidance, and then exceed estimates by a large amount quarter after quarter.  KMX does not seem to do this.

The average post-announcement stock price change for KMX was 4.9%.  This is less than the current option prices which have priced in a likely 5.7% change.  Someone who likes the stock might take advantage of the higher option prices and write an out-of-the-money call against their stock, and collect some nice premium in addition to some price appreciation if the stock manages to move higher.

We do not have a strong feeling concerning which way we feel the stock is headed after next week’s announcement other than that we think it will probably go in the same direction as the actual results compared to estimates. Since there is no clear pattern of how well the company does compared to estimates, this leaves us with a neutral position on the direction the stock might take after the announcement.

We have developed what we call the Diagonal Condor Earnings Strategy as our preferred options play prior to announcements.

Based on our neutral outlook on KMX, these are the spreads we placed for the upcoming announcement:

Buy to Open KMX 11May18 58 puts (KMX180511P58)
Sell to Open KMX 06Apr18 61 puts (KMX180406P61) for a credit of $.08  (buying a diagonal)

Buy to Open KMX 11May18 67 calls (KMX180511C67)
Sell to Open KMX 06Apr18 64 calls (KMX180406C64) for a credit of $.08 (buying a diagonal)

The net maintenance requirement (investment) on these spreads is $294 per pair ($300 – $16 plus $10 commission), and we have a net credit of $6 per pair in the account.

This is what the risk profile graph looks like after the market close on April 6, assuming that implied volatility (IV) of the May options falls by 3, from the current 33 to 30 (which is consistent with prior earnings week IV drops for 5-week-out options).

With KMX currently trading just below $62, the graph shows that we should end up with a gain if the stock ends up at any price between $59 and $67 on Friday, April 6th.  The sweet spot of the graph shows an approximate gain of $200 (about 66%) if the price ends up between $61 and $64.

If the stock fluctuates by its average post-announcement amount (4.9%), it would end up somewhere between about $59 and $65. In six of the last eight quarters, the fluctuation would have landed somewhere inside of this range, and in two of the quarters, it would not have.

To summarize our thinking, based on the level of IV for the options prior to the announcement (67) compared to IV for further-out options (33), investors do not get unduly excited about earnings announcements from KMX. The stock generally fluctuates after the announcement in the same direction as the results compared to estimates.  The company does not show a pattern of either consistently beating or falling behind estimates.  We believe this pattern is a perfect candidate for the options play outlined above which is essentially a neutral outlook, neither particularly bullish or bearish, but does best if the stock only fluctuates moderately after the announcement.

Black Friday Special Offer Lowest Price Ever

Wednesday, November 8th, 2017

Learn the Exact Details of the Options Strategies That Have Resulted in Average Gains of 120% so far in 2017…

…at a Near-Give-Away Price Never Offered Before

Terry’s Tips is an options newsletter that has been around for 16 years.  Over that time period, we have developed and refined several options strategies that are enjoying unprecedented success.

We carry out 10 separate options portfolios for our subscribers to follow on their own with our favorite brokerage tastyworks or by having the trades executed automatically through thinkorswim’s Auto-Trade program.

Each portfolio is carried out in a separate account available for everyone to see (we don’t just publicize the most successful ones).  Each portfolio employs a specific pre-defined strategy using one or more underlying stocks or ETPs (Exchange Traded Products).   Unlike other options newsletters, we include the actual commissions in all our results.

The composite average gain for 2017 for our 10 portfolios through the first week of November was 120%.  Subscribers who mirrored all 10 of our portfolios would have invested $48,600 in January.  Those portfolios were worth $107,103 last week.  But of course, you can mirror just the portfolios that you like or choose.

We have made these gains with various strategies including Credit Spreads and Selling Naked Puts.  But for the last 16 years our flagship strategy is what we call the 10K Strategy.  It involves selling short-term options on individual stocks and using longer-term (or LEAPS) as collateral.  It is sort of like writing calls, except that you don’t have to put up all that cash to buy 100 or 1000 shares of the stock.  The 10K Strategy is sort of like writing calls on steroids.  It is an amazingly simple strategy that really works with the one proviso, that you select a stock that stays flat or moves higher over time.

How else in today’s investment world of near-zero dividend yields can you expect to make these kinds of returns?  Find out exactly how to do it by buying yourself a Black Friday gift for yourself and your family.  They will love you for it.

Lowest Subscription Price Ever:  As a Black Friday special, we are offering the lowest subscription price that we have ever offered – our full package, including:

    • Over 10 case study reports
    • my 60+ page White Paper – which explains my favorite option strategies in detail and shows you exactly how to carry them out on your own
    • a 14-day options tutorial program which will give you a solid background on options trading
    • and two months of our weekly newsletter full of tradable option ideas.

Here is a sampling of the additional free reports you will get with a subscription to Terry’s Tips:

How We Made 100% on Apple

VXX – The Holy Grail for the 10K Strategy

Using the Vertical Credit Put Spread

Eight Consecutive Earnings Play Wins and What We Learned

An Options Strategy That Could Realistically Make 40% a Month

Two 2015 Case Studies of Option Portfolios – COST and SBUX

It is hard to place a value on these special reports – if they helped you improve your investment results for the rest of your life, how much might they be worth to you?  Not exactly priceless, but maybe getting close to it.

For this lowest-price-ever $37.95 offer, click here, enter Special Code BF117 (or BF117P for Premium Service – $77.95).

If you are ready to commit for a longer time period, you can save even more with our half-price offer on our Premium service for an entire year.  This special offer includes everything in our basic service, and in addition, real-time trade alerts and full access to all 9 of our current actual portfolios so that you can Auto-Trade or follow any or all of them.  We have several levels of our Premium service, but this is the maximum level since it includes full access to all nine portfolios.  A year’s subscription to this maximum level would cost $1080.  With this half-price offer, the cost for a full year would be only $540.  Use the Special Code MAX17P.

This is a time-limited offer.  You must order by Monday, November 27, 2017.  That’s when the half-price offer expires, and you will have to go back to the same old investment strategy that you have had limited success with for so long (if you are like most investors).

This is the perfect time to give you and your family the perfect Thanksgiving and Black Friday gift that is designed to deliver higher financial returns for the rest of your investing life. Just imagine sitting around at the family get together and explaining to your favorite know it all buy and hold uncle about Vertical Bull Put Spreads as his eyes glaze over.

I look forward to helping you get the next investment cycle (ride the holiday retail economy cash injection) started off right by sharing this valuable investment information with you at the lowest price ever. It may take you a little homework, but I am sure you will end up thinking it was well worth the investment.

Happy trading.

Terry

P.S.  If you would have any questions about this offer or Terry’s Tips, please call Seth Allen, our Senior Vice President at 800-803-4595.  Or make this investment in yourself at the lowest price ever offered in our 16 years of publication – only $37.95 for our entire package.  Get it here using Special Code BF117 (or BF117P for Premium Service – $79.95).   Do it today, before you forget and lose out.  This offer expires on Monday, November 27, 2016.

P.P.S. Use special code MAX17P to get the ultimate Premium Special for $540 (normally $1080)

Back-to-School Special – Lowest Price Ever

Wednesday, September 6th, 2017

Back-to-School Special – Lowest Price Ever

Why must back-to-school purchases only be for the kids?  You got them new back-packs and pens and pads and lots of other things to help them make their learning experience a little easier or fun.

But how about yourself?   How about adults who would like to learn a little something, too?  What if you would like to learn how to dramatically improve your investment results?  Don’t you deserve a little something to help make that learning experience possible?

What better back-to-school gift could there be than a subscription to Terry’s Tips at the lowest price ever?  You will learn exactly how we have made over 100% so far this year trading our favorite strategy on two different stocks, and how you can do it yourself with your favorite stock.

We carry out 10 different portfolios with different options strategies, and you can learn each strategy and follow the actual results (including commissions) with all the trades we have made.  The composite average gain the 10 portfolios for the first 8 months of 2017 has been over 60%.

At the beginning of 2017, we set up an account to use our favorite strategy (we call it the 10k Strategy) using Mastercard (MA) options. MA has had a good run, gaining 27% so far this year.  Our portfolio has gained 110%, about 4 times as much.  Another portfolio was lucky enough to select Facebook (FB) as its underlying.  FB has gained 50% through the first 8 months of 2017 while our portfolio has gained 338%, over 6 times as much. Come on board and see every trade that we made in all 10 portfolios.

Many subscribers to Terry’s Tips have followed along with these portfolios since the beginning, having all their trades made for them through the Auto-Trade program at thinkorswim.  Others have followed our trades at another broker.  Regardless of where they traded, they are all happy campers right now.

We have made these gains with what we call the 10K Strategy.  It involves selling short-term options on individual stocks and using longer-term options (or LEAPS) as collateral.  It is sort of like writing calls, except that you don’t have to put up all that cash to buy 100 or 1000 shares of the stock.   It really works, especially if you select a stock that stays flat or moves higher over time.

We have other portfolios which have more modest goals.  Our most conservative portfolio selected 5 blue chip companies at the beginning of 2017 and used a strategy that would make a gain as long as these companies did not fall by 10% over the course of the year.  The annual goal for this portfolio was 30%, but it has over-achieved, picking up 32% so far, and is guaranteed to make 40% for the year as long as the underlying stocks don’t fall over 10% from here. (One of the underlyings, (JNJ) can only fall 6% for us to make the 40%.)

Another conservative portfolio was set up to make over 30% for the year as long as the overall market (the S&P 500) did not fall by more than 5% over the course of the year.  As you may know, the market has done quite well so far, gaining almost 10%, while our portfolio could be closed out for a 32% gain right now, and is on target to gain 40% for the year unless SPY drops over 15% between now and the end of the year.

These portfolios are carried out in separate broker accounts for our subscribers to follow.  We count all the commissions and don’t hide any of the trades (like many newsletters do).  Don’t you think you owe it to yourself to learn how we have done it and how you can do it on your own?

Lowest Subscription Price Ever:  As a back-to-school special, we are offering the lowest subscription price that we have ever offered – our full package, including all the free reports, my White Paper, which explains my favorite option strategies in detail, and shows you exactly how to carry them out on your own, a 14-day options tutorial program which will give you a solid background on option trading, and two months of our weekly newsletter full of tradable option ideas.  All this for a one-time fee of $39.95, less than half the cost of the White Paper alone ($79.95).

For this lowest-price-ever $39.95 offer, click here, enter Special Code BTS17 (or BTS17P for Premium Service – $79.95).

This is a time-limited offer.  You must order by Monday, September 18, 2017.  That’s when the half-price offer expires, and you will have to go back to the same old investment strategy that you have had limited success with for so long (if you are like most investors).

This is the perfect time to give you and your family the perfect back-to-school gift that is designed to deliver higher financial returns for the rest of your investing life.

I look forward to helping you get the school year started off right by sharing this valuable investment information with you at the lowest price ever. It may take you a little homework, but I am sure you will end up thinking it was well worth the investment.

Happy trading.

Terry

P.S.  If you would have any questions about this offer or Terry’s Tips, please call Seth Allen, our Senior Vice President at 800-803-4595.  Or make this investment in yourself at the lowest price ever offered in our 16 years of publication – only $39.95 for our entire package.  Get it here using Special Code BTS17 (or BTS17P for Premium Service – $79.95).   Do it today, before you forget and lose out.  This offer expires on Monday, September 18, 2017.

Macom Tech Solutions (MTSI) Surges to All-Time High, What’s Next?

Monday, July 24th, 2017

This week we are featuring a company listed on the Investor’s Business Daily (IBD) Top 50 List that broke to an all-time high in the past week.  In one of our portfolio’s, we use the IBD Top 50 List to find stocks that show strong upward momentum and place spreads which will profit if the upward momentum continues.  Actually, the stock can even fall a little for the maximum gain to be realized on these spreads.

Terry

Macom Tech Solutions (MTSI) Surges to All-Time High, What’s Next?

Macom Technology Solutions had its price target recently raised by Needham & Company and several firms have added to already sizeable positions.  Here are two of them-  First Trust Advisors LP Increases Stake in Macom Technology Solutions Holdings and FMR LLC Boosts Position in Macom Technology Solutions Holdings.

MTSI has been in an uptrend since late 2012 and broke to an all-time high in the past week.  The technical break followed an 8-week consolidation below a horizontal resistance level at $61.25 which is now viewed as strong support.  MTSI surged above the level on Thursday and held near its highs into the weekly close to offer confirmation of a sustained bullish break.

MTSI Chart July 2017

MTSI Chart July 2017

*source Tradingview.com

If you concur that there’s further upside ahead for Macom Technology Solutions, consider this trade which is a bet that the stock will continue to advance, or at least not decline very much over the next four weeks.

Buy To Open MTSI 18Aug17 55 Puts (MTSI170818P55)
Sell To Open MTSI 18Aug17 60 Puts (MTSI170818P60) for a credit of $1.18 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when MTSI was trading near $63.  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 $500 maintenance fee, making your investment $384 ($500 – $116).  If MTSI closes at any price above $60 on August 18, 2017, both options would expire worthless, and your return on the spread would be 30% (395% annualized).

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

IBD Underlying Updates July 21, 2017

IBD Underlying Updates July 21, 2017

IBD Underlying Updates July 21, 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.  The Terry’s Tips portfolio which places spreads like the above one has gained 113.5% so far in 2017 in spite of incurring some losses on some of the spreads placed.  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

Lumentum Holdings (LITE) Is Coiling For An Up Move

Tuesday, June 27th, 2017

This week we are looking at another company listed on the Investor’s Business Daily (IBD) Top 50 List.  We use this list in our portfolio to find stocks that have been strongly trending higher and this week’s stock is an outperformer which has done exactly that.  The Terry’s Tips ’ portfolio that uses this list as its source for underlying ideas is now up 90.3% for the year to date.

Terry

Lumentum Holdings (LITE) Is Coiling For An Up Move

Lumentum Holdings hit all-time highs earlier this month and analysts believe there’s further upside ahead.  Here are two articles that reveal where Lumentum could be heading and why – Lumentum (LITE) PT Raised to $80 at Needham & Company; 3D Sensing Could Double LITE’S Value and DA Davidson Starts Lumentum (LITE) at Buy.

The technical outlook for LITE is solid.  The stock has been trending higher for over a year and a half and an acceleration of momentum can be seen since the start of May, shortly after the company announced earnings.

The earnings report caused a gap above the 20-day moving average and the stock has held above it since.  In addition to the moving average, horizontal support has been identified at $60.50 which held a decline earlier this month.

Lumentum has been consolidating sideways in a range over the past two weeks which is common in strong bullish trends.  A break of the upper end of the range, identified at $65.30, is likely to accompany an acceleration to the upside.

Lumentum Chart June 2017

Lumentum Chart June 2017

*source Tradingview.com

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

Buy To Open LITE 18Augy17 55 Puts (LITE170818P55)
Sell To Open LITE 18Aug17 60 Puts (LITE170818P60) for a credit of $1.73 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when LITE was trading at $64.  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 $2 per spread (and there is no commission on closing trades, only the $.10 clearing fee).  Each contract would then yield $171 and your broker would charge a $500 maintenance fee, making your investment $329 ($500 – $171).  If LITE closes at any price above $60 on August 18, 2017, both options would expire worthless, and your return on the spread would be 52% (312% annualized).

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

IBD Underlying Updates June 23, 2017

IBD Underlying Updates June 23, 2017

IBD Underlying Updates June 23, 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.  As we said above, the Terry’s Tips portfolio which places spreads like the above one has gained 90% in the first six months of 2017 in spite of incurring some losses on some of the spreads placed.  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

Actual Positions in One Terry’s Tips Portfolio

Monday, June 5th, 2017

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.

Terry

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.

Current positions:

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)

Honey Badger Portfolio Positions June 2017

Honey Badger Portfolio Positions June 2017

 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:

IBD Underlying Updates June 2017

IBD Underlying Updates June 2017

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.

Happy trading,

Terry

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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