from the desk of Dr. Terry F Allen

Skip navigation

Member Login  |  Contact Us  |  Sign Up

On The Rocks

October 18, 2022

BlackRock (BLK) is the world’s largest asset manager with more than $10 trillion in assets under management (AUM) heading into 2022. But that has changed dramatically, as evidenced by Thursday’s release of BLK’s latest earnings report that showed AUM tumbling 16% in the third quarter. The Ukraine war, high inflation, rising interest rates and the strong dollar were all cited as reasons why investors were pulling money from BLK funds. The company is also receiving backlash for its support of environment, social and governance (ESG) initiatives.

The stock gained ground the day after the report, but that was on “Bonkers Thursday” when a huge rising tide lifted all stocks. BLK retreated on Friday after encountering solid resistance at its 20-day moving average (blue line). This continues a downtrend that has been intact since mid-August. The slide has been perfectly contained by the 20-day, which hasn’t allowed a daily close above it in nearly two months. The stock is also down 40% this year, despite 75% of covering analysts rating the stock a buy.

This bearish trade is a bet that the problems plaguing BLK won’t go away any time soon. We’re going with a call credit spread with the short call sitting above the 20-day, meaning the stock will have to pierce this resistance to move the spread into the money.

If you agree that BLK will continue to decline under the weight of the 20-day, consider the following trade that relies on the stock staying below $580 (red line) through expiration in six weeks:

Buy to Open the BLK 25 Nov 590 call (BLK221125C590)
Sell to Open the BLK 25 Nov 580 call (BLK221125C580) for a credit of $3.40 (selling a vertical)

This credit is $0.10 less than the mid-point price of the spread at Friday’s $550.95 close. Unless BLK 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 $338.70. This trade reduces your buying power by $1,000, making your net investment $661.30 per spread ($1,000 – $338.70). If BLK closes below $580 on Nov. 25, both options will expire worthless and your return on the spread would be 51% ($338.70/$661.30). 

Making 36%

Making 36% – A Duffer's Guide to Breaking Par in the Market Every Year in Good Years and Bad

This book may not improve your golf game, but it might change your financial situation so that you will have more time for the greens and fairways (and sometimes the woods).

Learn why Dr. Allen believes that the 10K Strategy is less risky than owning stocks or mutual funds, and why it is especially appropriate for your IRA.

Order Now

Success Stories

I have been trading the equity markets with many different strategies for over 40 years. Terry Allen's strategies have been the most consistent money makers for me. I used them during the 2008 melt-down, to earn over 50% annualized return, while all my neighbors were crying about their losses.

~ John Collins

Member Login  |   Programs and Pricing  |  Testimonials  |  About Us  |  Terms and Conditions  |  Accessibility Statement  |  Privacy Policy  |  Site Map

Options are not suitable for all investors as the special risks inherent to options trading my expose investors to potentially rapid and substantial losses. Please read Characteristics and Risks of Standardized Options before investing in options

© Copyright 2001-2022 Terry's Tips, Inc. dba Terry's Tips
235 Primrose Lane, Ferrisburgh, VT 05456