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Posts Tagged ‘Vertical Put Spread’

Horizon Therapeutics (HZNP) Has More Than Doubled in 2020

Monday, September 21st, 2020

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.

HZNP has gained 120% YTD and several analysts expect it will continue to march higher. Check out the following two reports for several reasons why the company is likely to remain in demand – 5 Reasons to Invest in Horizon Therapeutics Amid Coronavirus and Hedge Funds Never Been This Bullish On Horizon Therapeutics (HZNP).

Technicals

When stocks are in a strong bullish trend, there are often periods of consolidation that are followed by a continuation higher. HZNP shows exactly this pattern as the stock consolidated in a sideways range for six weeks before finally breaking higher in the past week. The same $76 price point that previously acted as resistance has acted as support following the bullish range breakout which is also a positive sign. In the event the stock dips below $76, there is strong support from a rising trendline that has been in play for nearly six months.

HZNP Chart September 2020

HZNP Chart September 2020

If you agree there’s further upside ahead for HZNP, consider this trade which relies on the stock remaining above $80 through the expiration on October 16.

Buy To Open HZNP 16OCT20 75 Puts (HZNP201016P75)
Sell To Open HZNP 16OCT20 80 Puts (HZNP201016P80) for a credit of $2.13 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when HZNP was trading near $80.  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 $211.70. This reduces your buying power by $500 and makes your investment $288.30 ($500 – $211.70).  If HZNP closes at any price above $80 on October 16, both options will expire worthless, and your return on the spread would be 73% ($211.70 / $288.30), or 1066% 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

Dollar General (DG) Looks Set to Continue the Steady Rise

Monday, September 14th, 2020

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.

Several Analysts have good things to say about DG, here are two of them – 2 Top Stocks to Buy in September and Hedge Funds Keep Buying Dollar General Corp.

Technicals

DG has been trading within a rising trend channel for just over four months. The 50-day moving average is currently near the lower boundary of the channel to offer a confluence of support. A test of this support zone in the past week resulted in a move higher which shows that buyers are willing to defend this area. In addition to the steady trend, DG has outperformed most of the stocks on the IBD Top 50 list over the past few weeks.

DG Chart September 2020 - Rising Trend

DG Chart September 2020

If you agree there’s further upside ahead for DG, consider this trade which relies on the stock remaining above $200 through the expiration on October 16.

Buy To Open DG 16OCT20 195 Puts (DG201016P195)
Sell To Open DG 16OCT20 200 Puts (DG201016P200) for a credit of $1.98 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when DG was trading near $200.  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 $196.70. This reduces your buying power by $500 and makes your investment $303.30 ($500 – $196.70).  If DG closes at any price above $200 on October 16, both options will expire worthless, and your return on the spread would be 65% ($196.70 / $303.30), or 741% annualized.

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

IBD Underlying Updates September 12, 2020

IBD Underlying Updates September 12, 2020

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

Microsoft (MSFT) – Recent Tech Sell-Off Offers a Buying Opportunity

Monday, September 7th, 2020

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.

The following two articles offer compelling reasons why MSFT could move higher. The first is an analyst upgrade with a price target of $240 – Microsoft Stock (MSFT) Gets Price Target Increase To $240 From Mizuho. The second article outlines MSFT’s competitive advantages –  2 Tech Stocks That Are Thriving Despite the Coronavirus.

Technicals

We offered a trade idea in MSFT at the start of August and the option spread used in the idea expired for a 74% profit on Friday. Because of the decline over the past few days, the stock is once again testing the same trendline that made the trade attractive last time around. The 50-day moving average is also in play and this is an indicator the stock has not closed below in over four months. Friday’s candlestick formation signals buying activity and that the support confluence is being defended, at least so far.

MSFT Chart September 2020

MSFT Chart September 2020

If you agree there’s further upside ahead for MSFT, consider this trade which relies on the stock remaining above $212.50 through expiration on October 9.

Buy To Open MSFT 09OCT20 210 Puts (MSFT201009P210)
Sell To Open MSFT 09OCT20 212.5 Puts (MSFT201009P212.5) for a credit of $1.20 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when MSFT was trading near $214.  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 $118.70. This reduces your buying power by $250 and makes your investment $131.30 ($250 – $118.70).  If MSFT closes at any price above $212.50 on October 9, both options will expire worthless, and your return on the spread would be 90% ($118.70 / $131.30), or 1027% annualized.

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

IBD Underlying Updates September 5, 2020

IBD Underlying Updates September 5, 2020

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

Netflix (NFLX) Regains Upward Momentum

Monday, August 31st, 2020

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.

NFLX rallied to a six-week high in the past week and shows the potential to continue higher. The following two articles outline reasons why the stock could continue the momentum – Hooking Up or Locking Down, Netflix Poised to Win Either Way, and Netflix (NFLX) Back in Rally Mode After Brief Correction.

Technicals

NFLX has rallied above a horizontal level near $510, which hints that the correction from mid-July to mid-August may have ended. The same level contained an earlier range and may now act as support on near-term declines. There is further support from the lower boundary of a trend channel that has encompassed the price action since March.

NFLX Chart August 2020 regains upward momentum

NFLX Chart August 2020

If you agree there’s further upside ahead for NFLX, consider this trade, which relies on the stock remaining above the 520 level during the next five weeks:

Buy To Open NFLX 2OCT20 515 Puts (NFLX201002P515)
Sell To Open NFLX 2OCT20 520 Puts (NFLX201002P520) for a credit of $3.30 (selling a vertical)

This credit is $0.02 less than the mid-point of the option spread when NFLX was trading near $524. 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 $328.70. This reduces your buying power by $500 and makes your investment $171.30 ($500 – $328.70).  If NFLX closes above $520 on October 2, both options will expire worthless, and your return on the spread would be 192% ($328.70 / $171.30), or 2,190% annualized.

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

IBD Underlying Updates August 29, 2020

IBD Underlying Updates August 29, 2020

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

Alibaba (BABA) Looks Appealing After Strong First Quarter Results

Monday, August 24th, 2020

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.

Several analysts expect more upside for BABA’s stock price. Check out what the following two reports had to say about it – Post-Earnings Alibaba (BABA) Opportunity and Will Alibaba Be the Next Trillion-Dollar Giant?

Technicals

From a technical perspective, BABA has been consolidating within a triangle for the better part of two months. More specifically, the stock is holding in an ascending triangle, a pattern that is bullish. The stock has not yet broken higher from it, but the recent upward momentum hints that it is only a matter of time. Typically, when a consolidation pattern like this is broken, the stock sees a renewal of upward momentum.

BABA Chart August 2020

BABA Chart August 2020

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

Buy To Open BABA 25SEP20 262.5 Puts (BABA200925P262.5)
Sell To Open BABA 25SEP20 265 Puts (BABA200925P265) for a credit of $1.23 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when BABA was trading near $266.  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 $121.70 while your buying power would be reduced by $250, making your net  investment $128.30 ($250 – $121.70).  If BABA closes at any price above $265 on September 25, both options would expire worthless, and your return on the spread would be 95% (121.70/128.30), or 1,084% annualized.

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

IBD Underlying Updates August 22, 2020

IBD Underlying Updates August 22, 2020

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 Bristol-Myers Squibb (BMY) Continue the Upward Momentum?

Monday, August 17th, 2020

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.

BMY is up nearly 40% from its low in March and several analysts expect it will continue to push higher. Check out the following article that discusses a potential 10% upside – Analysts Are Bullish on Top Healthcare Stocks: Pfenex (PFNX), Bristol Myers (BMY).  Also, take a look at why BMY might be appealing to growth investors – 3 Reasons Why Growth Investors Shouldn’t Overlook Bristol Myers (BMY).

Technicals

After a correction lower that started in May, BMY is showing signs that the uptrend has resumed. The stock has rallied above its 200-day moving average as well as a horizontal price point at $60. The moving average and horizontal level are now seen as strong support on the downside. Ahead of it, an additional support level is seen at $61.75. BMY is outperforming several of the stocks on the IBD Top 50 list in the month thus far. The higher time-frame charts for this stock point to renewed upward momentum while many of the other stocks on the list have started to move sideways.

BMY Chart August 2020

BMY Chart August 2020

If you agree there’s further upside ahead for BMY, consider this trade is based on the stock continuing its advance over the next five weeks, or at least not declining very much.

Buy To Open BMY 18SEP20 60 Puts (BMY20918P60)
Sell To Open BMY 18SEP20 62.5 Puts (BMY20918P62.5) for a credit of $0.68 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when BMY was trading near $63.  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 $1.30 per spread.  Each contract would then yield $66.70 and your broker would charge a $250 maintenance fee, making your investment $183.30 ($250 – $66.70).  If BMY closes above $62.5 on September 18, both options would expire worthless, and your return on the spread would be 36% (411% annualized).

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

IBD Underlying Updates August 15, 2020

IBD Underlying Updates August 15, 2020

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

Should You Buy Amazon (AMZN) Following Its Earnings Report?

Monday, August 10th, 2020

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.

Amazon had a strong quarter and the following two articles outline the earnings report and why the stock may head higher from here – Amazon (AMZN) Q2 Earnings and Revenues Top Estimates and Why Amazon Stock Climbed 14% Last Month.

Technicals

From a technical perspective, AMZN was held lower by a horizontal resistance level near $3250 on the rally that followed the recent earnings report. However, from a broader perspective, the stock has been firmly bid from a rising trendline that originates back to a low posted in March. Considering how long this trendline has been in place, and the long-term trend, the resistance at $3250 does not appear to be a big hurdle and it may only be a matter of time before this stock is trading at fresh all-time highs.

AMZN Chart August 2020 earnings announcment

AMZN Chart August 2020

If you agree there’s further upside ahead for AMZN, 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 AMZN 11SEP20 3160 Puts (AMZN200811P3160)
Sell To Open AMZN 11SEP20 3165 Puts (AMZN200811P3165) for a credit of $2.40 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when AMZN was trading near $3165.  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 $1.30 per spread.  Each contract would then yield $238.70 and your broker would charge a $500 maintenance fee, making your investment $261.30 ($500 – $238.70).  If AMZN closes at any price above $3165 on September 11, both options would expire worthless, and your return on the spread would be 91% (1038% annualized).

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

IBD Underlying Updates August 8, 2020

IBD Underlying Updates August 8, 2020

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

The Dip in Microsoft (MSFT) Offers a Buying Opportunity

Monday, August 3rd, 2020

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.

Microsoft has dipped lower over the past few weeks, but several analysts think the broader outlook calls for more upside. Check out the following two articles which discuss the recent earnings report and how the pros outweigh the cons for MSFT investors – Microsoft revenue grew 13% despite coronavirus and Should You Buy Microsoft (MSFT) Stock?

Technicals

From a technical perspective, there are a few things that make MSFT attractive at current prices. First, there is a trendline in place that extends back to lows posted in April and the stock is seen bouncing from it. Further, this same trendline is intersecting with the $200 level which is seen as a support level. In addition to support confluence, there is a candlestick pattern on a weekly chart that suggests a bullish reversal may be taking place.

MSFT Chart August 2020 buy dip in all time high

MSFT Chart August 2020

If you agree there’s further upside ahead for MSFT, 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 MSFT 4SEPT20 202.5 Puts (MSFT20084P202.5)
Sell To Open MSFT 4SEPT20 205 Puts (MSFT20084P205) for a credit of $1.08 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when MSFT was trading near $205.  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 $1.30 per spread.  Each contract would then yield $106.70 and your broker would charge a $250 maintenance fee, making your investment $143.30 ($250 – $106.70).  If MSFT closes at any price above $205 on September 4, both options would expire worthless, and your return on the spread would be 74% (844% annualized).

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

IBD Underlying Updates August 1, 2020

IBD Underlying Updates August 1, 2020

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

Can Chegg (CHGG) Continue the Upward Rally?

Monday, July 27th, 2020

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.

The following two articles outline several reasons why Chegg (CHGG) could see some more upside: Does Chegg (NYSE:CHGG) Have The Makings Of A Multi-Bagger? and Chegg (CHGG) Upgraded to Strong Buy: Here’s What You Should Know

Technicals

From a technical perspective, CHGG is seen dipping lower to test support from a rising trend channel that has encompassed price action since the middle of last month. Further support is seen just below the trend channel at the $70 price point. What’s most appealing is that the stock has been outperforming the broader markets in recent times and has held ground while other stocks have eased back. A minor hurdle is seen near $75. If the stock is able to clear it, the odds for a new record high appear favorable.

CHGG Chart July 2020

CHGG Chart July 2020

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

Buy To Open CHGG 21AUG20 65 Puts (CHGG200821P65)
Sell To Open CHGG 21AUG20 70 Puts (CHGG200821P70) for a credit of $1.68 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when CHGG was trading near $73.  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 $1.30 per spread.  Each contract would then yield $166.70 and your broker would charge a $500 maintenance fee, making your investment $333.30 ($500 – $166.70).  If CHGG closes at any price above $70 on August 21, both options would expire worthless, and your return on the spread would be 50% (730% annualized).

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

IBD Underlying Updates July 25, 2020

IBD Underlying Updates July 25, 2020

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

Should You Buy the Dip in Adobe (ADBE)?

Monday, July 20th, 2020

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.

Adobe has been a long-term outperformer and the recent dips could offer an attractive entry point for buyers. Check out what the following two analysts have to say about the stock – Here’s Why Adobe (ADBE) Stock Could be a Solid ‘Buy’ in Today’s Market and Is Adobe Stock A Buy Right Now? Here’s What Earnings, ADBE Chart Show.

Technicals

Adobe has corrected lower in the past week and is seen testing a confluence of support. The support area consists of a horizontal level at $423 that previously acted as support in late June as well as the lower bound of a trend channel that has encompassed price action since April. The earlier downside momentum has already subsided which signals that buyers are defending this area. While above $423, the stock has the potential to continue higher, in line with the trend from the low in March.

ADBE Chart July 2020 buy the dip

ADBE Chart July 2020

If you agree there’s further upside ahead for ADBE, 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 ADBE 21AUG20 425 Puts (ADBE200821P425)
Sell To Open ADBE 21AUG20 430 Puts (ADBE200821P430) for a credit of $2.15 (selling a vertical)

This price was $0.02 less than the mid-point of the option spread when ADBE was trading near $432.  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 $1.30 per spread.  Each contract would then yield $213.70 and your broker would charge a $500 maintenance fee, making your investment $286.30 ($500 – $213.70).  If ADBE closes at any price above $430 on August 21, both options would expire worthless, and your return on the spread would be 75% (855% annualized).

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

IBD Underlying Updates July 18, 2020

IBD Underlying Updates July 18, 2020

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

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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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