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FAQ

Auto-Trade is a mechanism whereby an investor enters into an agreement with his broker authorizing the broker to make trades in the investor’s account based on recommendations of a financial newsletter such as Terry’s Tips.

It is important to understand that we are not a licensed investment advisor. We publish an investment newsletter that maintains several portfolios (with different strategies and underlying stocks or ETFs). We offer investment ideas but we are not managing your money or acting as an investment advisor. We do not make recommendations concerning which portfolios might be best for you. If you choose to mirror one of our portfolios, you are making an investment decision on your own, regardless of whether you have signed up for Auto-Trade with your broker or not.

Subscribers need a margin level account to participate in auto-trade though Terry’s Tips will never trade on margin.  Most subscribers use regular investment accounts for auto-trade and all of our trades are okay to do in an IRA.

Subscribers to Terry’s Tips receive (if they request it) real-time Trade Alerts emailed to them as well as to a broker of their choice where they might have an Auto-Trade arrangement.

How much does Auto-Trade it cost?

If you Auto-Trade with Tastyworks, there is no charge for Auto-Trade other than their normal commission rates ($1.65 per contract for opening positions, no charge for closing positions). Tradier has an agreement with a Toronto-based broker called Global Autotrade whereby Tradier covers Global’s normal fee of $50 per month for one portfolio, $30 for a second portfolio, and $10 for additional portfolios if you trade 100 contracts each month. Tradier’s total commission fee is $10 which should save you hundreds or thousands of commission dollars each year. You may want to trade two or three Terry’s Tips portfolios in one account at Tradier if you want to guarantee hitting the 100 per month contracts level,

How do I sign up for Auto-Trade? First you would sign up for at Terry’s Tips and select the portfolio(s) you’d like to follow. Then you would open and fund an account with Tradier or Tastyworks, select Terry’s Tips as your newsletter provider, and select the number of units of each portfolio you would like to trade. Full instructions are provided for our members.

What brokers offer Auto-Trade?

Contact us directly for more information about brokers and Auto-Trade. At the present time, we only have arrangements with tastyworks and  Tradier. For many years, we dealt with thinkorswim at TDAmeritrade, but when Schwab bought the company, they eliminated the Auto-Trade service.

Does my Auto-Trade account have to be separate from other accounts?

Yes, at both tastyworks and  Tradier, they require separate accounts for Auto-Trade. You may have as many portfolios as you wish in the Auto-Trade account, but you can’t place trades on your own in them (unless you want to opt out and close out all your positions).

Do you have access to my Auto-Trading account?

No, we do not know how many units you are trading or how many portfolios, and we don’t know your password or account number.

Can I get out of the Auto-Trade program at any time?

Yes, you may cancel at any time. You must cancel with Terry’s Tips as well as with the broker. You are responsible for removing any current positions from your account when you cancel.

Do you have access to my Auto-Trade Accounts?

No. We have no access to your personal accounts. We have no idea how much money you have invested or what other holdings you have.

What should I do if I decide to add (or remove) other portfolios through Auto-Trade?

Please email autotrade@terrystips.com with the name of the portfolio you will be adding (or removing).

Can I still join a portfolio even if I missed the start date?

Yes, a member may join any current portfolio. The only thing to note is that the unit amount is no longer the flat starting value. Once the portfolio starts trading, the unit value becomes a variable and is based on the actual account value. If you are not an Insider of Terry’s Tips, please inquire about the most recent unit values for our various portfolios at autotrade@terrystips.com.

Current Terry’s Tips Insiders can learn the approximate amount required to join any of the current strategy portfolios by reviewing the Summary of Strategy Portfolios chart in our Saturday Report.

Is there a limit to how much I can invest?

No. There is no limit to how much money you can invest. In fact, we know nothing about your account or how much investment capital you have devoted to mirroring our portfolios.

Is there a limit to how many people or how much total capital this program can handle?

At the present time, we are not worried that the collective trades of Terry’s Tips subscribers who have signed up for Auto-Trade with their brokers will affect the market. In fact, our experience has been that the larger the number of options your broker places as a single order, the better the price that can be negotiated.

When option positions are put on, the person on the other side of the trade is usually a market maker (Terry used to be one, so he has a solid understanding of how they work). The market maker earns his living by buying at the bid price and selling at the asked price – the more action for him, the better. He usually seeks a delta neutral position, so that he does not care which way the market moves.

There are dozens of other spread strategies a market maker employs – including buying or selling the stock, use of both puts and calls – back spreads, butterflys, trading against the box, ratio spreads, vertical spreads, diagonal spreads, straddles, and even strangles. Whenever a market maker is faced with a large demand for one particular option, he will use that demand as part of a larger strategy he is following. The bottom line is that large numbers of any single option can be traded without affecting its price (this does not hold true for less-actively traded options in individual companies, however).

TERRY’S TIPS STOCK OPTIONS TRADING BLOG

September 26, 2022

Housing Poor

Homebuilding stocks got a boost early in the week after a prominent housing analyst upgraded the entire sector, including a rare “double upgrade” for Lennar (LEN) from underweight to overweight. The rationale was that housing tends to outperform coming out of a bear market and that “early pain = early gain.”

Now, he could very well be right … at some point. Housing stocks, along with the broader market, will eventually pull out of this bear market. But that’s off in the future. We’re still in the “early pain” phase.

LEN got a boost from the news but then trended lower after a mixed earnings report and another 75 bps rate hike from the Fed (with more to come). The stock could not pierce its declining 20-day moving average (blue line), which has kept a lid on LEN’s rally attempts after turning lower two months ago. Furthermore, the 50-day moving average (red line), which is now headed lower, sits overhead, ready to provide resistance.

This trade is based on more “early pain” for the homebuilders based on rising interest rates, mortgage rates at 14-year highs and the looming prospect of a recession. We are playing a call credit spread with the short call sitting above the 50-day, meaning that LEN will have to overcome two points of resistance to move the spread into the money.

If you agree that LEN will continue to slide lower, consider the following trade that relies on the stock staying below $82 (green line) through expiration in six weeks:

Buy to Open the LEN 4Nov 85 call (LEN221104C85)
Sell to Open the LEN 4Nov 82 call (LEN221104C82) for a credit of $1.05 (selling a vertical)

This credit is $0.02 less than the mid-point price of the spread at Friday’s $77.07 close. Unless LEN sags quickly, you should be able to get close to that price.

The commission on this trade should be no more than $1.30 per spread. Each spread would then yield $103.70. This trade reduces your buying power by $300, making your net investment $196.30 per spread ($300 – $103.70). If LEN closes below $82 on Nov. 4, both options will expire worthless and your return on the spread would be 53% ($103.70/$196.30). 

September 20, 2022

Pumped Up

Much is made of gas prices declining for so many weeks in a row (I think we’re at 13 and counting). And that’s great for drivers. But what about the oil companies. Don’t they suffer when pump prices decline? Apparently not.

Gas prices peaked in mid-June and have dropped about 25% since then. But Chevron (CVX) has gained more than 5% during that period. For the year, CVX is up 33%. Its only major blip this year was the June swoon that pulled all stocks lower. But the decline was supported by the 200-day moving average, which allowed just a handful of daily closes below it in mid-July.

This trade is based on the strength of oil companies continuing for the next couple of months. More specifically, it is relying on the continued support of the 200-day. Note that the short put of our spread is right on the 200-day (blue line) and will be below it given the trendline’s current slope. Thus, CVX will have to penetrate that support to move the spread into the money.

If you agree that CVX will respect the 200-day, consider the following trade that relies on the stock staying above $148 (red line) through expiration in six weeks:

Buy to Open the CVX 28Oct 145 put (CVX221028P145)
Sell to Open the CVX 28Oct 148 put (CVX221028P148) for a credit of $0.75 (selling a vertical)

This credit is $0.05 less than the mid-point price of the spread at Friday’s $156.45 close. Unless CVX pops quickly, you should be able to get close to that price.

The commission on this trade should be no more than $1.30 per spread. Each spread would then yield $73.70. This trade reduces your buying power by $300, making your net investment $226.30 per spread ($300 – $73.70). If CVX closes above $148 on October 28, both options will expire worthless and your return on the spread would be 33% ($73.70/$226.30). 

September 12, 2022

September 12, 2022

Warp Speed for This Lithium Producer

Sociedad Quimica y Minera de Chile (SQM) producers highly sought after commodities, most notably lithium and potassium fertilizers. Though it missed on earnings in its August earnings report, it easily beat on sales. A couple of analysts raised their price target after the news, though the overall mood toward the stock is between a buy and a hold.

But what do analysts know? SQM is up 120% this year (not a typo) … and it pays a dividend of more than 11%. The stock has recovered what it lost following earnings and came within four cents of hitting an all-time high in Friday’s trading. Though it has traded mostly sideways for the past three months, the overall uptrend remains intact, as the stock continues to put in higher lows. Plus, its 20-day and 50-day moving averages are pointed higher.

This trade is a play on SQM’s continued strength as it sits in one of the most favorable sectors within the global economy – supplying EV battery makers. We are thus going with a put credit spread with the short put sitting below the 20-day moving average (blue line). 

If you agree that SQM will continue its uptrend, consider the following trade that relies on the stock staying above $100 (red line) through expiration in six weeks:

Buy to Open the SQM 21Oct 95 put (SQM221021P95)
Sell to Open the SQM 21Oct 100 put (SQM221021P100) for a credit of $1.10 (selling a vertical)

This credit is $0.02 less than the mid-point price of the spread at Friday’s $111.12 close. Unless SQM pops quickly, you should be able to get close to that price.

The commission on this trade should be no more than $1.30 per spread. Each spread would then yield $108.70. This trade reduces your buying power by $500, making your net investment $391.30 per spread ($500 – $108.70). If SQM closes above $100 on October 21, both options will expire worthless and your return on the spread would be 28% ($108.70/$391.30). 

Upcoming Market Dates:

Monday September 5th. Market closed for Labor Day
Monday October 10th. Market closed for Columbus Day

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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.

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