Tag Archives: Options Strategy

Option Trade of the Week – Losing Power

May 1, 2023

Dear [[firstname]],

Here is your Option Trade of the Week, as included in this past weekend’s Saturday Report for our Terry’s Tips Insider Members. This is a post-earnings stock trade on a utility that closed flat today, so you can enter the position at the same price as my Insiders. Good luck with the trade!

But first, how about our Honey Badger portfolio?! Trading only QQQ options, it’s on fire, up a whopping 30% for 2023. Of course, don’t forget that our portfolios beat their underlying stock performance by an average of 22% in 2022.

Don’t miss out on the profits. For our loyal (thanks for that, by the way) newsletter subscribers, I’m keeping the sale going that saves you more than 50% on a monthly subscription to Terry’s Tips.

You’ll get …

A month of all trade alerts in our four portfolios, giving detailed instructions for entering and exiting positions.
Four to five (depending on the month) weekly issues of our Saturday Report, which shows all the trades and positions for our four portfolios, a discussion of the week’s trading activity and early access to our Option Trade of the Week.
Instructions on how to execute the 10K Strategy on your own.
A 14-day options tutorial on the opportunities and risks of trading options.
Our updated 10K Strategy white paper, a thorough discussion of the strategy basics and tactics.
Full-member access to all our premium special reports that can make you a wiser and more profitable options trader.

To become a Terry’s Tips Insider Member, just Click Here, select Sign Up Now and use Coupon Code D21M to start a monthly subscription to Terry’s Tips for half off. You can cancel after a month but, of course, still keep all the valuable reports.

We look forward to having you join us! Now on to the trade …

Losing Power

NextEra Energy (NEE) is an electricity generator and provider operating in southern Florida. You may know it by its principal subsidiary – Florida Power & Light, the largest electric utility in the U.S. NEE reported earnings this week that seemed strong. The company swung to a profit and easily beat both earnings and revenue estimates. It added 65,000 customers, as everyone is moving to Florida. It reiterated its earnings projections for 2023 and it plans to boost dividends by 10% per year through next year.

What’s not to like?

Well, analysts apparently were not energized, as the shares were hit with a downgrade and a few target price cuts (there was one target increase). Despite the sour reaction, the stock has an overall outperform rating and average target price 23% above Friday’s close. In fact, the target sits just above NEE’s all-time high, which seems a bit overinflated. This tells me that there is more than ample room for further downgrades and target cuts.

The stock price followed the analysts’ lead by dropping 6.3% in the two days following earnings. That pulled the shares below the 20-day moving average, a trendline that had guided NEE higher during the previous month. The stock also fell below the 50-day moving average but recovered later in the week. That said, NEE closed the week 3% below its pre-earnings price.

The most daunting technical obstacle, however, is the flat 200-day moving average, sitting between the 80 and 81 levels. This trendline has served as both support and resistance and now appears ready to keep the shares below the 80 level. I’ll note that the stock hit a two-month high a point below the 200-day a week ago. This trade is based on this resistance holding as NEE struggles with the post-earnings blues.

If you agree that NEE will fail to overtake its 200-day moving average (blue line) for the next few weeks, consider the following trade that relies on the stock staying below $80 (red line) through expiration in 7 weeks:

Buy to Open the NEE 16 Jun 82.5 call (NEE230616C82.5)
Sell to Open the NEE 16 Jun 80 call (NEE230616C80) for a credit of $0.50 (selling a vertical)

This credit is $0.05 less than the mid-point price of the spread at Friday’s $76.63 close. Unless NEE sags at the open on Monday, 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 $48.70. This trade reduces your buying power by $250, making your net investment $201.30 per spread ($250 – $48.70). If NEE closes below $80 on June 16, both options will expire worthless and your return on the spread would be 24% ($48.70/$201.30).

Testimonial of the Week

It is often said that options are to stock trading as chess is to checkers. I was looking to find the chess master amongst the checker’s champs, and Terry is the one. Looking for the very smart yet understandable way to trade options? Look no further.

~ Phil Wells

Any questions? Email Terry@terrystips.com. Thank you again for being a part of the Terry’s Tips newsletter.

Happy trading,

Jon L

Option Trade of the Week – Stuck in Neutral

April 18, 2023

Dear [[firstname]],

Here is your Option Trade of the Week, as included in this past weekend’s Saturday Report for our Terry’s Tips Insider Members. This stock hasn’t done much this week, so you can enter this trade at about the same price as my Insiders. Good luck with the trade!

But first, it’s time for my usual pitch for our premium Terry’s Tips service. We’re solidly in the black this year, led by our Honey Badger portfolio (it trades QQQ options), which is up an impressive 23%. Don’t forget that our portfolios beat their underlying stock performance by an average of 22% in 2022.

Don’t get left behind. For our loyal newsletter subscribers, I’m keeping the sale going that saves you more than 50% on a monthly subscription to Terry’s Tips.

You’ll get …

A month of all trade alerts in our four portfolios, giving detailed instructions for entering and exiting positions.
Four to five (depending on the month) weekly issues of our Saturday Report, which shows all the trades and positions for our four portfolios, a discussion of the week’s trading activity and early access to our Option Trade of the Week.
Instructions on how to execute the 10K Strategy on your own.
A 14-day options tutorial on the opportunities and risks of trading options.
Our updated 10K Strategy white paper, a thorough discussion of the strategy basics and tactics.
Full-member access to all our premium special reports that can make you a wiser and more profitable options trader.

Stuck in Neutral

Used-car retailer CarMax (KMX) is a stock that attracts a wide range of opinions. This week, KMX reported earnings that had something for both bulls and bears. On the bullish side, earnings per share (EPS) more than doubled the consensus estimate. But the bears will point out that net income fell 57% from a year earlier. Revenue declined 25% and fell far short of expectations. And the company pointed out that “headwinds remained due to widespread inflationary pressures, climbing interest rates, tightening lending standards, and prolonged low consumer confidence.” Even so, KMX affirmed its long-term financial targets.

Analysts were all over the road with their reactions. Some pointed to the success of KMX’s cost management strategy. Others reiterated the headwinds the company itself discussed. If there is a consensus, it appears that the short to neutral term will be challenging, while the longer-term outlook is encouraging.

KMX’s chart also has some headwinds in the form of the 200-day moving average. The stock hasn’t closed a day above this declining trendline since December 2021. Rally attempts in August and February were stopped in their tracks by the 200-day. And so was the post-earnings pop this week.

This trade is a bet that the short-term road will be bumpy for KMX and that the 200-day will continue to keep the stock in a six-month trading range bounded on the upside by the 75 level. This is also where the 200-day currently resides.

If you agree that KMX will struggle under the weight of its 200-day moving average (blue line) for the next few weeks, consider the following trade that relies on the stock staying below $75 (red line) through expiration in 7 weeks:

Buy to Open the KMX 2 Jun 78 call (KMX230602C78)
Sell to Open the KMX 2 Jun 75 call (KMX230602C75) for a credit of $0.70 (selling a vertical)

This credit is $0.05 less than the mid-point price of the spread at Friday’s $69.46 close. Unless KMX plunges at the open on Monday, 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 $68.70. This trade reduces your buying power by $300, making your net investment $231.30 per spread ($300 – $68.70). If KMX closes below $75 on June 2, both options will expire worthless and your return on the spread would be 30% ($683.70/$231.30).

Testimonial of the Week

Thanks so much for detail explanation of each trade. I simply love your report and eagerly waiting for your report every Saturday. I am glad I found you guys. I am super happy to learn how your make a trade and invest with so much dedication, active management and vast array of knowledge, otherwise it’s simply not possible to see such wonderful returns.

~ Senjeev

Any questions? Email Terry@terrystips.com. Thank you again for being a part of the Terry’s Tips newsletter.

Happy trading,

Jon L

Option Trade of the Week – Here’s The Beef

March 27, 2023

Dear [[firstname]],

Here is your Option Trade of the Week, as included in this past weekend’s Saturday Report for our Terry’s Tips Insider Members. It was another post-earnings play, this time on a restaurant stock. Good luck with the trade!

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Terry’s Tips portfolios are on fire! The combined four portfolios had their best week in six weeks and have more than doubled the return of the S&P 500. The Honey Badger portfolio (it trades QQQ options) is up a whopping 24% so far this year! Don’t forget that our portfolios beat their underlying stock performance by an average of 22% in 2022.

Don’t get left behind. For our loyal newsletter subscribers, I’m keeping the sale going that saves you more than 50% on a monthly subscription to Terry’s Tips.

You’ll get …

A month of all trade alerts in our four portfolios, giving detailed instructions for entering and exiting positions.
Four to five (depending on the month) weekly issues of our Saturday Report, which shows all the trades and positions for our four portfolios, a discussion of the week’s trading activity and early access to our Option Trade of the Week.
Instructions on how to execute the 10K Strategy on your own.
A 14-day options tutorial on the opportunities and risks of trading options.
Our updated 10K Strategy white paper, a thorough discussion of the strategy basics and tactics.
Full-member access to all our premium special reports that can make you a wiser and more profitable options trader.

Here’s The Beef

Darden Restaurants (DRI) – a sit-down restaurant chain conglomerate that includes Olive Garden, LongHorn Steakhouse and Capital Grille – reported earnings this week that beat on virtually every measure. Not only did the company top earnings and sales estimates, same-store sales growth also came in above expectations. And DRI upped guidance above the expected range. The company claimed that raising prices less than the rate of inflation drove higher sales.

Analysts cheered the news, though none upgraded the stock. Price target increases were plentiful, pushing the average to $159. But that’s hardly ebullient, as it sits just 4% above Friday’s closing price. That seems reasonable, however, unlike many so-called “growth” stocks.

The stock dropped less than half a percent after the report. Perhaps that’s because it rallied into earnings, a move that broke above a trading range that had contained the shares for much of this year. Despite the range, the stock has been in an overall uptrend since June, rising nearly 40%. The 50-day moving average has guided this rally, although here have been dips below it, the most recent coming earlier this month.

This trade is not necessarily a bet that DRI will continue rising. It’s more a defensive play that the stock will not suffer a serious decline and will remain above the 50-day (blue line) and the bottom of the recent trading range. We’re going a little further out of the money with the short put strike to add a measure of safety. That, of course, means the credit is less. Note that we are going out eight weeks, as DRI does not have weekly options.

If you agree that DRI will continue to trade in a range – or at least not weaken – consider the following trade that relies on the stock staying above $145 (red line) through expiration in 8 weeks:

Buy to Open the DRI 19 May 140 put (DRI230519P140)
Sell to Open the DRI 19 May 145 put (DRI230519P145) 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 $152.58 close. Unless DRI surges, 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 DRI closes above $145 on May 19, both options will expire worthless and your return on the spread would be 28% ($108.70/$391.30).

Testimonial of the Week

I have been a subscriber for about a year. I autotrade in 2 different accounts, all your strategies. I read everything you write on Saturdays. I love your happiness thoughts and everything else. I usually do not communicate at all but I had to tell you how well my accounts with you are doing compared to everything else. You are awesome. Keep up the good work. Thank you. – Maya

Any questions? Email Terry@terrystips.com.

Thank you again for being a part of the Terry’s Tips newsletter.

Happy trading,

Jon L

Option Trade of the Week – If You Build It …

March 20, 2023

Dear [[firstname]],

Here is your Option Trade of the Week, as included in this past weekend’s Saturday Report for our Terry’s Tips Insider Members. It was another post-earnings play, a strategy we’ve had success with of late.

Before getting to the trade, I wanted to let you know that the Terry’s Tips portfolios are gaining steam. The combined four portfolios are beating the S&P 500, led by the Honey Badger portfolio (it trades QQQ options), which is up a whopping 19% so far this year! Don’t forget that our portfolios beat their underlying stock performance by an average of 22% in 2022.

Don’t get left behind. For our loyal newsletter subscribers, I’ve decided to keep the sale going that saves you more than 50% on a monthly subscription to Terry’s Tips that includes …

A month of all trade alerts in our four portfolios, giving detailed instructions for entering and exiting positions.
Four to five (depending on the month) weekly issues of our Saturday Report, which shows all the trades and positions for our four portfolios, a discussion of the week’s trading activity and early access to our Option Trade of the Week.
Instructions on how to execute the 10K Strategy on your own.
A 14-day options tutorial on the opportunities and risks of trading options.
Our updated 10K Strategy white paper, a thorough discussion of the strategy basics and tactics.
Full-member access to all our premium special reports that can make you a wiser and more profitable options trader.

If You Build It …

They will buy. At least that’s what homebuilders think based on the latest builder confidence survey, which ticked higher for the third month in a row. On Wednesday, the Census Bureau will release February’s residential construction numbers, and the market is expecting gains in starts and completions.

On the company level, Lennar (LEN) reported earnings this week that easily beat on the top and bottom lines. The company also projected home sales for next quarter and the full year that are higher than the consensus analyst estimates. The stock received several target price increases, though no ratings upgrades. The average target price is about 10% above Friday’s close, while the average rating is between a buy and hold. Given that the stock is up nearly 50% in the past five months, it seems some analysts are behind the curve.

The stock is currently riding along the support of its 50-day moving average which came into play after a pullback from a 52-week high hit in early February. The stock pulled away from this trendline after the earnings report, though not far enough to take its support out of play.

Note that the short strike of our put spread is below the 50-day (blue line) and the 20-day (red line), which has turned higher. Thus, the stock will have two pierce two levels of support to move the spread into the money.

If you agree that LEN will maintain its long-term uptrend, using the support of its 50-day and 20-day moving averages, consider the following trade that relies on the stock staying above $97.5 (green line) through expiration in 5 weeks:

Buy to Open the LEN 21 Apr 95 put (LEN230421P95)
Sell to Open the LEN 21 Apr 97.5 put (LEN230421P97.5) for a credit of $0.55 (selling a vertical)

This credit is $0.02 less than the mid-point price of the spread at Friday’s $103.50 close. Unless LEN surges, 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 $53.70. This trade reduces your buying power by $250, making your net investment $196.30 per spread ($250 – $53.70). If LEN closes above $97.50 on Apr. 21, both options will expire worthless and your return on the spread would be 27% ($53.70/$196.30).

Any questions? Email Terry@terrystips.com. Thank you again for being a part of the Terry’s Tips newsletter.

Happy trading,

Jon

Option Trade of the Week – Cry Me a Rivian

March 7, 2023

Dear [[firstname]],

Here is your Option Trade of the Week, as given to our Terry’s Tips Insider Members as part of their Saturday Report. I again stayed on the bearish side this week, as this market is looking very vulnerable, especially after today’s Congressional testimony from Jerome Powell.

However, as I did a couple of weeks ago, I’m revising the trade because the position has run away from the opening price. Because of a huge plunge in the stock price today, the trade is already up nearly 20% in just two days. Because I still believe in the premise of the trade, I’m changing the strikes to give you a similar entry credit … and, of course, profit. Good luck with it.

Before getting to the trade, I wanted to let you know that the Terry’s Tips portfolios are on a hot streak. The combined four portfolios are now beating the S&P 500, led by the Boomer’s Revenge portfolio, which is up a whopping 18% so far this year! That’s on top of the 33% gain during last year’s horrible market performance. Overall, our portfolios beat their underlying stock performance by an average of 22% in 2022.

Don’t get left behind. For our loyal newsletter subscribers, I’ve decided to keep the sale going that saves you more than 50% on a monthly subscription to Terry’s Tips. For just $98, you’ll get:

A month of all trade alerts in our four portfolios, giving detailed instructions for entering and exiting positions.
Four to five (depending on the month) weekly issues of our Saturday Report, which shows all the trades and positions for our four portfolios, a discussion of the week’s trading activity and early access to our Option Trade of the Week.
Instructions on how to execute the 10K Strategy on your own.
A 14-day options tutorial on the opportunities and risks of trading options.
Our updated 10K Strategy white paper, a thorough discussion of the strategy basics and tactics.
Full-member access to all our premium special reports that can make you a wiser and more profitable options trader.

Cry Me a Rivian

Electric car maker Rivian (RIVN) reported earnings on Tuesday after the bell that were mixed at best. The company narrowed its adjusted Q4 loss to beat the consensus estimate but missed considerably on revenue. Of greater importance, however, is RIVN’s expected 2023 production of 50,000 compared to the expected 60,000 units.

But on Friday, word “leaked” of a 62,000-unit goal discussed at an internal company meeting. The shares reacted with a 7.6% surge, but still closed the week lower. Although nobody knows for sure, this looks to me like a classic “buy the rumor, sell the news” scenario.

What is known, however, is that the stock was hit with a number of lowered price targets on the earnings news. Yet even with the reductions, the average target price is nearly double Friday’s close. That’s awfully optimistic for a stock that is down 70% from its 52-week high and 8% so far this year. Moreover, the EV space is getting more crowded, even as the dominant player – Tesla – is enjoying a resurgence.

On the chart, RIVN is trading toward the bottom of a two-month range that is being pressured by the declining 20-day (red line) and 50-day (blue line) moving averages. The short call strike of our bearish credit spread sits above these trendlines, so the stock will have to break through this double-barrelled resistance to move the spread into the money.

If you agree that RIVN will struggle with technical resistance following an uninspiring earnings report, consider the following trade that relies on the stock staying below $19 (green line) through expiration in 6 weeks:

Buy to Open the RIVN 14 Apr 18 call (RIVN230414C18)
Sell to Open the RIVN 14 Apr 16 call (RIVN230414C16) for a credit of $0.45 (selling a vertical)

This credit is $0.01 less than the mid-point price of the spread at Tuesday’s $14.64 close. Unless RIVN falls 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 $43.70. This trade reduces your buying power by $200, making your net investment $156.30 per spread ($200 – $43.70). If RIVN closes below $16 on Apr. 14, both options will expire worthless and your return on the spread would be 28% ($43.70/$156.30).

Testimonial of the Week

Any questions? Email Terry@terrystips.com. Thank you again for being a part of the Terry’s Tips newsletter.

Happy trading,

Jon

Option Trade of the Week – Low Energy

February 22, 2023

Dear [[firstname]],

Here is your Option Trade of the Week, as given to our Terry’s Tips Insider Members as part of their Saturday Report. I stayed on the bearish side this week but opted for an ETF rather than a post-earnings trade.

I’m doing something I rarely do with these trades for the free newsletter – I’m altering it because the trade has run away from the opening price. That is, it’s already up close to 20% in just two days. Because I still believe in the premise of the trade, I’m changing the strikes to give you a better chance for entry … and, of course, profit. Good luck with it.

Before getting to the trade, I wanted to let you know that the Terry’s Tips portfolios are on a hot streak. The combined four portfolios are now beating the S&P 500, led by the Boomer’s Revenge portfolio, which is up a whopping 23% so far this year! That’s on top of the 33% gain during last year’s horrible market performance. Overall, our portfolios beat their underlying stock performance by an average of 22% in 2022.

A month of all trade alerts in our four portfolios, giving detailed instructions for entering and exiting positions.
Four to five (depending on the month) weekly issues of our Saturday Report, which shows all the trades and positions for our four portfolios, a discussion of the week’s trading activity and early access to our Option Trade of the Week.
Instructions on how to execute the 10K Strategy on your own.
A 14-day options tutorial on the opportunities and risks of trading options.
Our updated 10K Strategy white paper, a thorough discussion of the strategy basics and tactics.
Full-member access to all our premium special reports that can make you a wiser and more profitable options trader.

Low Energy

Although there were plenty of earnings reports this week, there weren’t many tradeable choices. By that I mean stocks with options that have decent bid/ask spreads. So, we’re taking a week off from post-earnings plays and going with a powerhouse ETF, the SPDR Utilities ETF (XLU). This market-cap-weighted, $15 billion fund holds utilities companies included in the S&P 500, including NextEra Energy (NEE), Duke Energy (DUK) and Southern Co. (SO).

XLU has underperformed in 2023, falling around 3% compared to the 6.5% increase in the S&P 500. The slide has been guided lower by the 20-day moving average, although the ETF closed slightly above this trendline last Friday. But the 20-day re-asserted itself this week to continue XLU’s slide.

XLU’s top 10 holdings have a similar story, as one would expect. The average return in 2023 is -2.4%, with eight of the 10 in the red. Seven are trading below their respective 50-day moving averages. And eight of the 10 50-day moving averages are declining or rolling over.

This trade is based on XLU continuing its downtrend over the next several weeks. The nearest level of support rests at the 64.50 level (3.6% below Wednesday’s close), the site of bottoms in February and June of last year. The declining 20-day moving average (blue line) remains in play as resistance, which is below the short call strike of our spread (red line), meaning the ETF will have to pierce this resistance to move the spread into the money.

If you agree that XLU will continue to struggle under the weight of moving-average resistance, consider the following trade that relies on the ETF staying below $68.50 through expiration in less than 6 weeks:

Buy to Open the XLU 31 Mar 70.5 call (XLU230331C70.5)
Sell to Open the XLU 31 Mar 68.5 call (XLU230331C68.5) for a credit of $0.50 (selling a vertical)

This credit is $0.02 less than the mid-point price of the spread at Wednesday’s $66.94 close. Unless XLU falls 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 $48.70. This trade reduces your buying power by $200, making your net investment $151.30 per spread ($200 – $48.70). If XLU closes below $68.50 on Mar. 31, both options will expire worthless and your return on the spread would be 32% ($48.70/$151.30).

Any questions? Email Terry@terrystips.com. Thank you again for being a part of the Terry’s Tips newsletter.

Happy trading,

Jon L

Option Trade of the Week – No Do-Over for Earnings

February 15, 2023

Dear [[firstname]],

Here is your Option Trade of the Week, as given to our Terry’s Tips Insider Members as part of their Saturday Report. It’s another post-earnings trade, this time on the bearish side. And you can now collect even more premium for this trade than when I first sent it out.

Before getting to the trade, it’s time for another plug to join Terry’s Tips as an Insider Member that lets you trade up to four portfolios. These portfolios use our proprietary 10K Strategy, which has generated average annual gains of 60% for the past five years in actual brokerage accounts (including all commissions). In 2022, our portfolios beat their underlying stock performance by an average of 22%.

And we’re off to a great start in 2023 … in fact, our portfolio based on IWM, the popular small-cap ETF, is up nearly 14% year to date.

For our loyal newsletter subscribers, I’ve decided to keep the sale going that saves you more than 50% on a monthly subscription to Terry’s Tips. For just $98, you’ll get:

A month of all trade alerts in our four portfolios, giving detailed instructions for entering and exiting positions.
Four to five (depending on the month) weekly issues of our Saturday Report, which shows all the trades and positions for our four portfolios, a discussion of the week’s trading activity and early access to our Option Trade of the Week.
Instructions on how to execute the 10K Strategy on your own.
A 14-day options tutorial on the opportunities and risks of trading options.
Our updated 10K Strategy white paper, a thorough discussion of the strategy basics and tactics.
Full-member access to all our premium special reports that can make you a wiser and more profitable options trader.

No Do-Over for Earnings

Take-Two Interactive Software (TTWO) – the developer of popular video games such as Grand Theft Auto and Red Dead Redemption – reported earnings this week that were not fun and games. The company fell short of expectations for earnings and revenue (more specifically, net bookings), citing gamers being more careful with their spending. To add more misery, TTWO lowered its revenue guidance for the fourth quarter and FY 2023. The company also announced cost-cutting measures, including dropping personnel.

Analysts were mostly disappointed in the report, responding with a series of lowered target prices (there was one increase). The new average target is still 17% above Friday’s closing price, so there’s room for more cuts. There were no rating changes, which seems at odds with the price moves. Given that 80% of covering analysts rate the stock a buy or better, you’d think there could be some downgrades based on earnings that could put pressure on the shares.

Despite the poor report, TTWO surged nearly 8% the day after earnings. But that brought the stock close to its declining 200-day moving average, a trendline it last traded above exactly one year ago. Moreover, it’s noteworthy that the shares sagged throughout the rest of the week following the earnings pop. This trade is thus based on the 200-day resistance holding over the next several weeks, as we are playing a call spread with the short call strike sitting above the trendline.

If you agree that TTWO will continue to struggle under the weight of the 200-day moving average (blue line), consider the following trade that relies on the stock staying below $117 (red line) through expiration in 7 weeks:

Buy to Open the TTWO 31 Mar 120 call (TTWO230331C120)
Sell to Open the TTWO 31 Mar 117 call (TTWO230331C117) for a credit of $0.85 (selling a vertical)

This credit is $0.05 less than the mid-point price of the spread at Friday’s $111.10 close. Unless TTWO falls 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 $83.70. This trade reduces your buying power by $300, making your net investment $216.30 per spread ($300 – $83.70). If TTWO closes below $117 on Mar. 31, both options will expire worthless and your return on the spread would be 39% ($83.70/$216.30).

Any questions? Email Terry@terrystips.com. Thank you again for being a part of the Terry’s Tips newsletter.

Happy trading,

Jon

Option Trade of the Week – Going With The Science

February 8, 2023

Dear [[firstname]],

Here is your Option Trade of the Week, as given to our Terry’s Tips Insider Members as part of the Saturday Report. Being in the heart of earnings season, we again had several solid opportunities to choose from this week. We’re going scientific this week with another bullish play.

Before getting to the trade, I want you to know that we are extending our huge discount offer to join Terry’s Tips as an Insider Member that lets you trade up to four portfolios. These portfolios use our proprietary 10K Strategy, which has generated average annual gains of 60% for the past five years in actual brokerage accounts (including all commissions). In 2022, our portfolios beat their underlying stock performance by an average of 22%.

We’re still running a special new-year sale that saves you more than 50% on a monthly subscription to Terry’s Tips. For just $98, you’ll get:

A month of all trade alerts in our four portfolios, giving detailed instructions for entering and exiting positions.
Four to five (depending on the month) weekly issues of our Saturday Report, which shows all the trades and positions for our four portfolios, a discussion of the week’s trading activity and early access to our Option Trade of the Week.
Instructions on how to execute the 10K Strategy on your own.
A 14-day options tutorial on the opportunities and risks of trading options.
Our updated 10K Strategy white paper, a thorough discussion of the strategy basics and tactics.
Full-member access to all our premium special reports that can make you a wiser and more profitable options trader.

Going With The Science

Thermo Fisher Scientific (TMO) provides analytical instruments, diagnostics and lab products for life sciences research. Before the bell on Wednesday, the company reported earnings that easily beat estimates on both revenue and earnings per share (EPS). However, EPS fell from a year earlier, while operating margins contracted.

Analysts were apparently impressed by the report, as the stock was hit with a wave of target price increases. There were no rating upgrades, though perhaps that’s because analysts are already bullish on the stock.

The stock reacted by moving 3% higher on Wednesday. That may not sound like much, but TMO has a history of subdued moves after earnings. In fact, it was the second-largest one-day move since April 2021. More importantly, though, is the fact that the shares bounced off their 50-day moving average to continue a rally that has seen TMO gain 23% off a Nov. 2 low. Moreover, the stock is now sitting above its 20-day moving average.

The 50-day moving average is the key to this trade, as the stock has closed below this trendline just once since crossing above it in mid-November. We’re counting on this support, as the short strike of our put spread sits just below the 50-day.

If you agree that TMO will continue to rally along the support of its 50-day moving average (blue line), consider the following trade that relies on the stock staying above $560 (red line) through expiration in 6 weeks:

Buy to Open the TMO 17 Mar 550 put (TMO230317P550)
Sell to Open the TMO 17 Mar 560 put (TMO230317P560) for a credit of $2.25 (selling a vertical)

This credit is $0.05 less than the mid-point price of the spread at Friday’s $587.76 close. Unless TMO rises 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 $223.70. This trade reduces your buying power by $1,000, making your net investment $776.30 per spread ($1,000 – $223.70). If TMO closes above $560 on Mar. 17, both options will expire worthless and your return on the spread would be 29% ($223.70/$776.30).

Testimonial of the Week

Any questions? Email Terry@terrystips.com. Thank you again for being a part of the Terry’s Tips newsletter.

Happy trading,

Jon

Tarnished Goldman

January 24, 2023

Dear [[firstname]],

Here is your Option Trade of the Week, as given to our Terry’s Tips Insider Members as part of the Saturday Report. With earnings season underway, we’re back to our typical earnings plays with a return to the bearish side.

Before getting to the trade, there’s still time to jump on our huge discount offer to join Terry’s Tips as an Insider Member that lets you trade up to four portfolios. These portfolios use our proprietary 10K Strategy, which has generated average annual gains of 60% for the past five years in actual brokerage accounts (including all commissions). In 2022, our portfolios beat their underlying stock performance by an average of 22%.

We’re still running a special new-year sale that saves you more than 50% on a monthly subscription to Terry’s Tips. For just $98, you’ll get:

A month of all trade alerts in our four portfolios, giving detailed instructions for entering and exiting positions.
Four to five (depending on the month) weekly issues of our Saturday Report, which shows all the trades and positions for our four portfolios, a discussion of the week’s trading activity and early access to our Option Trade of the Week.
Instructions on how to execute the 10K Strategy on your own.
A 14-day options tutorial on the opportunities and risks of trading options.
Our updated 10K Strategy white paper, a thorough discussion of the strategy basics and tactics.
Full-member access to all our premium special reports that can make you a wiser and more profitable options trader.

Tarnished Goldman

With earnings season now underway, we can focus on companies that have recently reported. Though the docket was sparse this past week, there were a few juicy names to choose from. One was Goldman Sachs (GS), which reported a miserable quarter before the week’s trading began on Tuesday.

Earnings plunged 66% from a year earlier on slower corporate dealmaking and 48% lower investment banking fees. Earnings per share came in at $3.32, far below the expected $5.56. FactSet noted it was the bank’s largest miss in years. Revenue also dropped and missed estimates.

The stock reacted by falling 6.4% on Tuesday, its second-largest one-day, post-earnings decline since April 2009. The week didn’t get any better for GS, as reports came in on Friday that the Federal Reserve is investigating whether the bank had the appropriate safeguards in its consumer business. The stock fell 2.5% on a day when stocks were higher.

The stock’s 8.6% plummet last week pulled it below its 20-day and 50-day moving averages. The 50-day is rolling over into a decline for the first time in three months, while the 20-day appears poised to head lower as well. We are going with a bearish call spread, with the short call strike sitting between the 20-day (blue line) and 50-day (red line) trendlines. However, given the 50-day’s current path, it should fall below this strike and serve as a second potential point of resistance to keep the spread out of the money.

If you agree that GS will continue to struggle, consider the following trade that relies on the stock staying below $360 (green line) through expiration in 6 weeks:

Buy to Open the GS 3 Mar 365 call (GS230303C365)

Sell to Open the GS 3 Mar 360 call (GS230303C360) for a credit of $1.25 (selling a vertical)

This credit is $0.05 less than the mid-point price of the spread at Friday’s $341.84 close. Unless GS falls 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 $123.70. This trade reduces your buying power by $500, making your net investment $376.30 per spread ($500 – $123.70). If GS closes below $360 on Mar. 3, both options will expire worthless and your return on the spread would be 33% ($123.70/$376.30).

Any questions? Email Terry@terrystips.com

Testimonial of the Week

~ Maya

Any questions? Email Terry@terrystips.com.

Thank you again for being a part of the Terry’s Tips newsletter.

Happy trading,

Terry

Trade of the Week – Attention Shoppers

January 9, 2023

Dear [[firstname]],

Here is your Option Trade of the Week, generated by our trading team, for your consideration. We’re going with another ETF this week, but this time back on the bearish side.

Before getting to the trade, there’s still time to jump on our huge discount offer to join Terry’s Tips as an Insider Member that lets you trade up to four portfolios. These portfolios use our proprietary 10K Strategy, which has generated average annual gains of 60% for the past five years in actual brokerage accounts (including all commissions). In 2022, our portfolios beat their underlying stock performance by an average of 22%.

We’re still running a special new-year sale that saves you more than 50% on a monthly subscription to Terry’s Tips. For just $98, you’ll get:

A month of all trade alerts in our four portfolios, giving detailed instructions for entering and exiting positions.
Four to five (depending on the month) weekly issues of our Saturday Report, which shows all the trades and positions for our four portfolios, a discussion of the week’s trading activity and early access to our Option Trade of the Week.
Instructions on how to execute the 10K Strategy on your own.
A 14-day options tutorial on the opportunities and risks of trading options.
Our updated 10K Strategy white paper, a thorough discussion of the strategy basics and tactics.
Full-member access to all our premium special reports that can make you a wiser and more profitable options trader.

Attention Shoppers

With earnings reports non-existent, we’re sticking with ETFs again this week, this time on the bearish side with the retail sector. The SPDR S&P Retail ETF (XRT) is a broad-based, equal-weighted index of around 100 retail stocks. No stock is worth more than 1.5% of the portfolio and the top 10 holdings are littered with small niche names, some of which I’ve frankly never heard of (Sally Beauty, Franchise Group, Leslie’s). Amazon and Costco, on the other hand, make up a mere 2.2% combined.

XRT had a rough 2022, losing about a third of its value. That puts it on par with tech stocks, which it is not, and trailing the broader market. Should we expect a rebound in 2023? I won’t hazard a guess. But we know the Fed will continue to raise rates to tame inflation. Many expect some sort of recession. The outlook appears muddy at best and bearish at worst.

XRT has staged a mini-rally to start 2023, gaining 3.8% in the first week. But the ETF is now bumping into its 50-day moving average. However, the 50-day hasn’t provided much resistance or support for the past several months. Of greater concern is the overhead 200-day moving average, which has been declining for more than a year. This trendline marked a top in August and kept XRT in check in November, allowing just two daily closes above it.

This bearish trade is a play on XRT once again faltering at the 200-day, which sits 3.7% above the Friday closing price. Note that the short call strike of our spread (red line) sits above the 200-day (blue line), meaning this resistance will need to be broken to move the spread into the money. Options traders have a similar outlook, pricing puts higher than equidistant out-of-the-money calls.

If you agree that XRT will fail to overtake the 200-day, consider the following trade that relies on the ETF staying below $66 through expiration in 6 weeks:

Buy to Open the XRT 17 Feb 69 call (XRT230217C69)

Sell to Open the XRT 17 Feb 66 call (XRT230217C66) for a credit of $0.85 (selling a vertical)

This credit is $0.05 less than the mid-point price of the spread at Monday’s $62.46 close. Unless XRT drops 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 $83.70. This trade reduces your buying power by $300, making your net investment $216.30 per spread ($300 – $83.70). If XRT closes below $66 on Feb. 17, both options will expire worthless and your return on the spread would be 39% ($83.70/$216.30).

Testimonial of the Week

Thank you again for being a part of the Terry’s Tips newsletter. Any questions? Email Terry@terrystips.com

Happy trading,

Terry

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