from the desk of Dr. Terry F Allen

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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

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

I’ve always had the greatest respect for Terry’s experience and teachings. There are numerous individuals now trying to sell option schemes. This new guy sending out emails, (name deleted), charging $5000 knows just enough to be dangerous–his free videos are bogus! In my humble opinion, Terry’s one of the few that’s got it right.

~ Robert Yates

Terry’s Tips is an ongoing educational experience for me. The Mesa approach offers the opportunity to view the changes in the market, the effects of extreme price swings, volatility and theta and still realize a profit! This trading reality has been more valuable to me than any text. The Saturday reports are a valuable adjunct, giving a detailed view of each portfolio, analyzing the past week’s performance and projecting “what-if’s” for the next week/expiration month.

Many thanks to Terry and his staff!

~ Emorsini

An extremely Profitable first half of 2008, then, Armageddon hit in the Fall, Summary Of my results: My personal Option Strategy accts lost 98.8 %, My Terrys Tips Might Mesa Account GAINED 34 % … Incredible !

~ Mark Ott

The weekly reports have proven invaluable as I’ve been able to set up similar portfolios on my own resulting in substantial profits while the markets have been dropping. I feel strongly that these strategies can benefit virtually any investor’s portfolio when used properly. When position sizing is properly maintained, these portfolios can add return non-correlated to the stock market.

~ Mark

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

Terry’s Tips makes me feel smarter than the professionals by out performing the market even during the worst down-turn in decades!

~ Gavilán

As a result of your new Big Dripper portfolio, I’ve been able to make substantial gains. To date, the annualized rate of return has been just under 70%. More importantly, the wide profit range of SPY prices makes it quite suitable for the current volatile environment.

~ Mark Chapman

The weekly reports have proven invaluable as I’ve been able to set up similar portfolios on my own resulting in substantial profits while the markets have been dropping. I feel strongly that these strategies can benefit virtually any investor’s portfolio when used properly. When position sizing is properly maintained, these portfolios can add return non-correlated to the stock market.

~ Mark

Bravo for Terry! Over the past months while the markets in general have tanked and had historically high volatility, Terry’s strategies have managed to show impressive gains in several of his portfolios. He has developed a method for making profits with options, even when the markets are gyrating in huge ranges and the typical investor is experiencing painful losses.

~ Mary Ann Norfleet, Ph.D.

I think of myself as a sophisticated investor and was certain my asset allocation was bullet-proof for the crash of 2008. I was out of stocks, 20% in precious metals, 10% in foreign currencies, 20% managed by (formerly) successful Commodity Trading Advisers.

The CTA’s are down 50%, gold and silver are down, currencies are down – the only segment of my assets that has grown has been the slice which follows Terry’s Tips and which is ‘auto-traded’ by my broker. Terry has done remarkably well. Thank you, Terry!

~ Bill Masciarelli

I’ve been involved with investing equities, options and futures for most of my life and I’m seventy years old. You are to be congratulated on your method, expertise and diligence. I plan to add to my account and the number of portfolios.

~ Karl

I’ve tried several “investment services” and newsletters over the last few years, but yours is the first one I really have confidence in.

~ Martin

…. with the market at its current lower level, that in the past it would take months and some times years to recover with stocks and mutual funds, where as the spreads that I have using your system take a couple of weeks to recover with far less upward movement in the market. I know that with my holdings in stocks and mutual funds in the past, that the most recent decline would look pretty bad on my statements. Right now, I’m way ahead of my July holdings from the market peak over 14,000. I’ve pulled out $25,000 to remodel my house and I’m still $50,000 up in my account after the withdrawals.

~ Marc

I’m an auto-trader of multiple portfolios (7 currently, and looking forward to adding the Emerging Elephant this week). Naturally, my favorite days as a Terry’s Tips trader are those days where the profits come pouring in. My second favorite days, however, are days like Monday, when the market is totally tanking, but the Terry’s Tips portfolios are experiencing only mild losses. (Yesterday, the major indices were down 1.8%-2.5%, but my Terry’s Tips portfolios were down in aggregate only about .5%, and several actually were up.)

~ Mark

Before rejoining Terry’s Tips three months ago I struggled to keep my head above water, even attempting to use the 10K strategy. Now when I look at our portfolio I think of the line from “Butch Cassidy and the Sundance Kid”, “who are these guys!”. Your performance is nothing less than remarkable and indicates a deep commitment of time and energy to make this happen. Yours is a rare accomplishment for a newsletter to help the small investor, the “little guy”, achieve success in the incredibly difficult world of investing. You should feel very proud. Thank you!

~ Neal

Couldn’t wait to share these results with you. With the DOW down 242 and Composite down 55 my TT portfolio held its ground with a net gain of $1418. I would have been jumping for joy if I had a $5000 loss for the day. Talk about preservation of capital with above average rates of return! I have 36% Calls/Puts, Big Bear, Smile SPY, Oil 4 and Apple. This market demonstrates that it is an excellent mix for great gains and downside protection. Believe me, I don’t miss getting my mutual fund statements that would probably be down right now about $30,000 since the highs in July and August. Thanks for your great work!

~ Marc

Thank you for your quick response to my question. I love your program, and have been trading it for just over a year now. However, as you know there is always something new or unusual which occurs and it’s nice to know I can count on you and your organization’s support when I have an issue.

I also want to thank you for my new BMW 5 series. I promised myself, (and convinced my wife) that I would buy it once I doubled my initial investment through using your program. Between June, 2006 and October, 2007, I did it, and my new car is now on order.

~ Joe P.

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

One of our goals at Terry’s Tips is to provide subscribers with enough options knowledge so they no longer need us. We were delighted to receive this message from a former subscriber:

I’m using your multiple spread strategy using the NDX as the underlying. I papered traded it for 6 months and was up over 100%! Went live on the Oct/Nov spreads and made 18% the first month. Thanks for the education!!

I’ve referred numerous people to your site when I tell them about the results I’ve seen.

~ Greg – Anoka, MN

You’re a class act and it’s obvious to me why you have become so successful. Keep up the good work. I look forward to staying with you for a long time.

~ Tim

Currently, I have been a customer of Terry’s Tips for just over one year. I have tried a number of your underlyings for the 10K strategy. Overall, I think I did pretty well for the year–up 39% net.

~ Brad

I am a new subscriber as of August of this year and have been very pleased with the service provided by Terry’s Tips. I started an auto traded account with thinkorswim and have been impressed on how well the actual fills mirror the recommendations. My 36% Solution Puts portfolio is up over 14% within the first 60 days.–way above my expectations—Thanks for delivering a service that so far has exceeded what you sell it to be.

~ Jeff

Good strategies, good feedback and excellent service overall. There are products out there peddling in the thousands of dollars and they don’t come close to what you offer.

~ Shmuel

After 25+ years at this, I have seen a lot of experts come and go. I have only found two where I consistently make money by following their experience and methods; one that I have followed since the ’80’s in the Hogs and Bellies at the Chicago Merc, and you. Nice work!

~ Bob

I signed up on Feb. 28, 2007 auto trading with my thinkorswim account. I’m even more amazed than I thought I’d be being up over $4400. on an initial investment of $10,400 since that date.

~ Zak

With my composite portfolio being up some 60+ % (even AFTER the correction we had in Feb) in just 16 months, I may be your single biggest fan. Keep up the good work.

~ Michael

I’ve been investing with Terry for less than 4 months (112 days) and would like to report that I’m up over 40% using Terry’s suggested positions in AAPL, GS, DIA, and OIH, only making minor departures from the “fairway” (a metaphor Dr. Allen can appreciate). I’m new to option spreads and am learning a great deal from Terry’s “literature,” Saturday Reports, and from the Thinkorswim software and website. For this success and your excellent, thoughtful and conservative management of the portfolios, I am very grateful. Sure beats writing covered calls.

~ Bill

I can’t figure out why everyone isn’t using calendar spreads using your method. Sometimes it seems too good to be true. My returns the past two years have been almost unbelievable. I don’t even try to tell anyone about it because they wouldn’t believe me.

~ Fred

I don’t know if a lot of subscribers thank you but my wife and I have watched the money that we have invested in your program grow at an alarming rate. We especially like the fact, which no other investments offer, the ability to cash out profits every month if they are earned. Cheers to you and your staff.

~ Rob

I am very very pleased with the performance of the portfolios. I’ve been interested in options for a very long time, but this seems to work more of the time and with better results. So I just keep moving more and more money from my self directed Ameritrade account to the autotrade accounts at TOS.

~ Justin

I had started with $10,000 in 36% solution at Oct’06 expiration. Closed that account with $14,020 after Apr’07 expiration. Started with $28,060 on another account at April’07 expiration. Closed at $32,500 at May’07 expiration. I have made close to 8% a month since you started the IWM portfolio.

~ Sanjeev

I have learned more about options from you than I have learned reading several option books. I was even a financial advisor for 5 years and have learned more about options from you than anyone.

~ Tyler

I have learned more than I ever expected for your tips and want to thank you for starting an educational journey I value more than my MBA.

~ Mark

I’d have confidence in your system…I have seen it work very well…currently I have had a first 100% gain, and am now working to diversify into more portfolios. Goldman/Sachs is also doing well – up about 40%…

This kind of trading is actually an “art”… I have my own field of expertise…but sadly I can only offer my great appreciation to what you do so instinctively.

~ Jay

My Oil Services 3 got set up on Monday April 23rd and GS was set up that following Wednesday. It is not May 4th and I have made almost $2600. In 10 days! So far this is not a 10k, it is a sprint!

~ Jan

Your service is just awesome and can’t wait to scrape up more $$ to put in other portfolios.

~ Ty

Just wanted to keep you informed of what I am doing in OIH. My profits to date are $18,322 (in 7 months) on a $34K investment using the 10K Strategy.

~ Roger

I have used a variation of the 10K Strategy with Cummings Engine and Goldman Sachs since the summer of 2006, and have made a 100% return on both investments.

~ Patrick

There is merit in using IWM for the 10K Strategy…I started an IWM portfolio on 5 Sep 06 and it is now my best performing portfolio, up more than 40% as at market close on 12 Jan07.

~ Janet

As a new subscriber in 2006, I wanted to take this opportunity to wish you and your family a great 2007!You and your staff have been most generous with your help as I become adept at using your method to invest in credit spreads. It has been the best year for me financially in the 10 years I have been investing and I am looking forward to getting better in the coming year with even greater financial success. You have given me the tools (education) to help ensure the financial security of my family and retirement and I wanted to take a moment to let you know that I appreciate it. Here’s to a tip of the hat to all at Terry’s Tips for a great 2006!

~ Michael W.

I’ve been trading GRMN using the 10K Strategy for the last three months and will double my money by the end of this month.

~ Nathan

I started with your service about 7 months ago using three different portfolios worth $70k. Those changed of course over time, but today I am using 5 of the portfolios and the value just crossed the $100k mark (actually $101k) this morning. I consider this quite remarkable considering I have been investing for the last 25 years and have never seen consistent gains as you have shown me.

~ Mark

I’ve been very impressed by not only your strong trading results, but your true dedication to your readers. Your hard work to keep us informed of both your portfolios and trading techniques is greatly appreciated. I look forward to your reports each week.

~ Gary

I’ve seen the results of the 10K strategy and believe in it. With the options calculator/graphic software you recommended, I can validate my own trades and run a variety of “what-if” scenarios to best suit my needs.

~ Kurt

I started 2005 with a $57,000 tax loss carry forward from 2004. I now figure that that is wiped out and I will pay tax on about $30,000, with about 95% of this strictly from calendar spreads using your ideas.

~ Fred in CA

Having been a Terry’s Tips subscriber for about a year, I do not view Terry as an adviser, but more of a “mentor for hire”. Within the context that we are all trading unpredictable markets, he allows his subscribers to watch over his shoulder, choose which markets they wish to trade, and opt out when the going gets tough. He shares his failures and his successes with equal frankness and honesty. I have found nothing in his marketing to be untrue, and when a strategy strays from his stated goal, he is quick to shut it down.

~ Bob D.

Your 10K strategy really works. I made a $5,000 within a month. Thanks a lot.

~ Kazuo

Btw, the last 8 months or so have really been a fantastic learning experience with the current strategies!

~ Sylvio

I started my (10K) Google on 10/24/05 (lucky) so I’m currently up 93% (as of 12/9/05). I couldn’t have done it without you.

~ Bob

I am now willing to declare that I have made a 100% return using the 10K Strategy since I started with individual stocks on November 19, 2004 … I would tell my kids: “Write it on the chalkboard and repeat after me: This 10K Strategy works if you do it right.”

~ Fred from Kansas

You guys ROCK !!!!!!!!!!!!!!!!!! I’m truly amazed by your emails.

~ Ziv G., San Francisco

Well, I’ve just finished the daily program and it was absolutely fantastic! You guys have put together an excellent program. When I initially signed up, I was hoping to learn about option spreads, how to set them and when to use them. Learning how to integrate them into well-defined strategies has been a welcome bonus.

~ Jeremy C., Coffs Harbour, Australia

‘scuse me for jumping in here. I also subscribe to “Terry’s Tips”. First advisory service I ever have subscibed to … I’ve been pleasantly surprised. As an option writing beginner (lost plenty with naked calls) as you say you learn the basic strategy very quickly. What Terry adds is the small details. How do you handle things in the last days of expiration. What to do with options you wrote which have very little time value approaching expiration. How to select the correct strike for next months writes etc.

I’m sure these are all obvious to you, but have provided an interesting education for me.One other thing – I think he gives to charity (some of?) the subscription price. He also gives to charity $1000 per day, I believe. These facts were just sufficient to convince me to have a go. I’m glad I did.

~ Steve (excerpt from Yahoo! Finance Message Board)

Hi Terry! I hope you are doing well. First of all I want to thank you for sharing with us such a powerful, profitable and low risk strategy. This is really great. I love it. Thanks again.

~ Muhammad

Using your system, I started trading QQQQ in my Roth IRA 12 August 03 with Thinkorswim. At that time, the account value was $82,000. On the opening of the last trading day of this year, 31 Dec 03, the account is worth more than $145,000. This is an over $60,000 increase in less than 5 months!

~ John D

I turned a $20,000 account into $102,000. $30,000 of that was added to the account during the year so I had a profit of $52,000. I don‚t know exactly how to do the math but it seems to me to be about 200%. I started using your ideas using the QQQQ options. Mostly I tried to follow your 10K strategy, I traded up to higher strike prices aggressively, and use the proceeds to buy more positions. I made $33,000 on this strategy in about 5 months. I now trade exclusively in QQQQ options in my main account.

~ Ross R.

Hi Terry – just finished reading your new summary of the 10k strategy and want to commend you on how well it is written.-well thought out, very concise, easy to understand and as we know, very profitable! I’ve been with you about a year now and have 4 different accounts utilizing the 10k and Easy Pie strategy. Besides QQQQ I have been using the strategy with DIA, FNM, WM and DHI -all with success. I am up over 50% and would be a lot higher had I utilized the Green/Amber/Red strategy, as I got burned in the beginning using the cover-your-butt strategy.

Anyhow, I just finished reading a novel, “The DaVinci Papers” and this new 10k strategy is comparable to my finding the holy grail! Keep up the good work!

~ Bob E.

I can’t thank you enough for your excellent service at such an extremely low price. I have subscribe to many services for many more dollars and have lost money. Sure they promise the moon and then in hindsight tell you how they made big money, but you tell us what to do and then do it yourself in a verifiable way. WOW! What a concept…I’m thrilled beyond words with the total results.

Thank you so very much and a HAPPY THANKSGIVING TO YOU AND YOUR STAFF.

~ Walter C

I’ve really enjoyed reading your commentary and studying your strategies, I’ve found this to be a great service (at a reasonable price!)

~ Jay S.

It is a joy to get e-mail from you as it always contains needed data and real word factual data. Of course, since I have nearly doubled my money in 7 months, it is no wonder that I am happy.

~ Bob J.

Just read your RSI input and thanks again for your very applicable inputs and information. You could keep it a secret and charge for all this great data you provide, but you seem to be more interested in providing us very helpful information and information we can learn from. It is a joy to get e-mail from you as it always contains needed data and real world factual data.

~ Bob H.

Just a note to thank you for your wonderful tuition and service, for me it’s like being a trainee option trader. Although I have an advanced degree in Finance with a specialization in derivatives I have not until now found a profitable way to trade the options markets successfully. Your explanation is simple and removes all the complicated stuff, in fact I don’t think its needed to play the market successfully, I guess that’s where your experience of having traded on the floor comes into play. Please keep up the good work.

~ Michael D.

Thanks for taking the time to clarify my understanding on the ratio question – you don’t get this quality of service much anymore. You earned the kind words…keep up the good work. Thanks.

~ Don M.

I sold the mutual find shares I had in small IRA, and began my OptionsXpress account in early April with about $5,300. My account’s value is now $11,000. Needless to say, I am very pleased. The hardest part of it is having the discipline to not “tinker” with it on a day-to-day basis. Thanks again for your advice and information. I really enjoy your writing style, and of course I’m enjoying the results of following your strategies too!

~ Randy G.

I have a PhD in math, but make my living from computers (software.) It is fair to say that during the last 25+ years I spent THOUSANDS of hours reading, learning, simulating and developing trading systems, mostly in the futures market (not that far from options, but more historical data is available.) Since I subscribed to your service, I spend most of my research time on it and I gain bigger and bigger confidence that “this is it (for me).

And finally, yet another praise of your methods, communication and teaching style. I learn something new from every single report. It is extremely useful for me that (like in this issue) you don’t simply list the changes to be made, but reveal the thought process behind them and discuss alternatives. I feel that these lessons will make me a better trader.

~ Joseph J.

I am not a writer of flattering letters to advisors, so it is of some consequence in my investing history that I tell you how happy I am with your 10k Strategy. I hope to make it grow into the most significant part of my investments and eventually rule the world. I will be benevolent towards you, Terry, in appreciation for your brilliance and willingness to let former small fries like myself get in on the action.

~ Ralph W.

Thanks for another excellent report. In your report about the Fannie Mae trades you said your goal was to underpromise and overdeliver. Your weekly reports and updates easily meet that lofty standard. I love it.

~ Kevin M.

I just wanted to let you know that the 10K strategy has worked wonders for me. In this ideal environment of little change in the DOW recently I have done very well. In June, with the DOW at 9200 I invested $48,000. Since then I currently have an account value of around $135,000. Not bad for 3 1/2 months!

I now have a boat load of cash. The question is what to do now.

~ Dale B.

Your strategy is paying off for me, an average of 18.5% gain per month since I started. Yahoo!!!!

~ Richard A. (Australia)

I would like you to know that I have learned much more from your tutorial than I did from hundreds of books and articles on options and strategies that I have read. I am sure your subscribers have had the same experience.

From your trading subscribers and me: many thanks!

~ Mark C.

I’ve previously attended a couple of seminars and read several “thick” books about options and writing covered calls, but nothing come close to what you teach. Your cut-the-chase, straight-to-the-point approach coupled with a live ongoing QQQQ-DIA trading program truly sets you and the rest apart. In K.I.S.S., you’re the best, Terry.

~ Kim, Grand Rapids, MI

Once I attended a Tai Chi Class thinking I knew what to expect… but the instructor was no average instructor but a Master… I immediately realized how much I didn’t know… and by putting aside my previous false assumptions I freed my mind to learn more… I sort of feel the same way now… So pardon me for my previous doubts about investment services in general. Your’s is like no other I’ve seen. :))

~ Andrew W.

I’m amazed by your ability to explain the complex analysis of options in a way that is thorough, practical and understandable. What I find so helpful is the way you describe your thought process for each trade. Please keep it up.

~ Kevin P., Pismo Beach, CA

I want to thank you again for your information and compared to other services I have tried, you provide a great bang for a buck. It is the real stuff and the numbers work, not like some trading schemes that sound good but when you try to make the trades the numbers are not there and such minor things as margin requirements are also not mentioned.

~ Bob T., Garland, TX

I can’t believe I made 31% in two months and the premium available is much lower than in the past! Double my money in any event in 4 months easy!

~ Jim B.

If this keeps up, I will double my money inside of 6 months Watching you cope has taught me more about option investing than I would ever have learned had the market not been so unpredictable.

~ Rich B.

Did you know that your recommended 35 companies have gained nearly 35% since Feb. All are winners except for QLGC -which has lost (6%). For the year to date they are ahead by 22%. I sure wish I had bought them… They seem like a great pick for buy and hold. Congratulations! Good luck.

~ Brian

I have cleared my original investment in 3 months, so logically I should be able to turn this 4 times a year. 4-500% profit on original investment????

Terry, this potential almost scares me. I am not sure this system should be publicly shared, if it works as well as it seems it will. I am an insurance agent specializing in Annuities paying 7% A YEAR! I am sure if I advertised managing money and doubling it yearly, I would be laughed at. Especially with CD rates at 2-3%.

~ Joe M.

I’ve studied your plan backwards and forwards and I think you’re a genius. I also love your charity focus. I plan on doing the same, as I develop financial security.

~ Richard S.

I find something new every time I read your material. Thanks for having me on board and thanks for your help and guidance.

~ Jim H.

Unfortunately since I asked you about BP it has dropped almost 4 bucks a share therefore proving your point that covered calls are not risk free 🙂 Therefore, I am REALLY becoming a believer in your techniques.

~ Sally T.

I just want you to know that I am having more fun with your strategies than you can imagine. Your prompt e-mail replies are really helpful and I am learning more about the market than I thought possible. You explain yourself so well and your vast knowledge and experience of being a market maker are invaluable.

I know you put a lot of pressure on yourself and feel responsible for your students success, but if we just follow the strategies, it will work out, so don’t feel that you are responsible for the market when it goes down. It has become obvious to me that you are doing this because you love teaching, and not for monetary gain.

~ Fred T.

Thanks very much!!! Dr. (a college professor) told me about you. So, I thought I would look into it. To me, it has been a great education. Hopefully, this education will turn out to be profitable as well.

~ Dr. H.C. (another college professor)

I have taken many seminars, including Wade Cook, Risk Averse Trading (RATS), Oxford club seminars, countless books and tapes, all the while searching for a strategy that I could duplicate, generate monthly income and that would fit my lifestyle. Not until I came upon your service did I find what I was looking for. Your system makes so much sense to me and your willingness to help is invaluable. If you ever need a testimonial or anything, please let me know. I realize this is long winded, but I really just wanted to say “Thank You!”

~ Your student, Bob F.

I want to thank you profusely for mentioning how to place buy and sell orders to get better prices. I’ve saved beaucoup $$$$$ since I was informed about it. You’re one of the few honorable (and accessible) people in the business.

~ Norm H.


June 6, 2024

June 5, 2024 Terry’s Tips Trade Alert – Wiley Wolf Portfolio

We are closing put spreads to increase delta:  

BTC 1 MSFT 21Jun24 402.5 put (MSFT240621P402.5)
STC 1 MSFT 19Jul24 435 put (MSFT240719P435) for a credit of $15.35 (selling a diagonal) (100%) 

BTC 1 MSFT 21Jun24 405 put (MSFT240621P405)
STC 1 MSFT 19Jul24 430 put (MSFT240719P430) for a credit of $11.90 (selling a diagonal) (100%) 

Be prepared to change this (these) price limit(s) by $.05 or more in order to get an execution.

Happy trading.


June 1, 2024

May 31, 2024 Terry’s Tips Trade Alert #3 – Rising Tide Portfolio

This completes rolling out and adds two call spreads

BTC 1 COST 31May24 795 put (COST 240531P795)
STO 1 COST 21Jun24 800 put (COST 240621P800) for a credit of $13.45 (selling a diagonal) (100%)

BTO 1 COST 19Jul24 830 call (COST 240719C830)
STO 1 COST 21Jun24 830 call (COST 240621C830) for a debit of $7.00 (buying a calendar)

BTO 1 COST 19Jul24 810 call (COST 240719C810)
STO 1 COST 21Jun24 810 call (COST 240621C810) for a debit of $8.70 (buying a calendar)

Be prepared to change this (these) price limit(s) by $.05 or more in order to get an execution.

Happy trading.


April 1, 2024

April 1, 2024

Fool Me Once …

There was nothing on the weekly earnings docket that I considered trade worthy. Even the few names I recognized were either too low-priced, had lousy options or bid/ask spreads, or, most importantly, not giving me a good chart read. During slow earnings periods – which include next week and most of the following week – I look back at past trades to see how they look today. One that I like just happens to be the last trade we closed for a loss. But I whiffed so badly on it – I suggested a bearish trade and the stock cruised 20% higher – that I now like it as a bullish play.

The stock is Veeva Systems (VEEV), which provides cloud-based software for the health sciences industry. VEEV reported solid earnings results in late February, beating estimates on revenue and earnings per share. Guidance for the first quarter came up short on revenue, which may be why the stock stumbled a bit after the report.

Analysts were very clear in their view toward VEEV, handing the stock a boatload of target price increases. Maybe they’re trying to play catch-up because the current average target price – after all the increases – is right around Thursday’s closing price. Given that VEEV is a tech stock (though it’s considered in the healthcare sector), that’s an underwhelming endorsement for a stock that’s rallied 40% in less than four months. It’s not hard to see how more target price increases and perhaps a ratings change or two (the current average rating is a buy) could be in the offing.

There aren’t many charts prettier than VEEV’s daily chart. The stock has climbed steadily since an early December low, riding along the solid support of its 20-day moving average. How solid? The trendline has been tested no less than a half-dozen times and has allowed just one daily close below it. This trade is based on the uptrend and support continuing for the next several weeks, perhaps aided by some analyst love.

The 20-day moving average sits just below the 230 level, while the 50-day is at 220. VEEV offers only monthly options, with strikes every 10 points within the range we want. Therefore, I am forced to go with the May series and the 220 short strike. This is producing a little less credit – and thus return – compared to our usual trades. But that means the short strike is further out of the money (less risky).

If you agree that the stock will continue to trade above its 20-day (blue line) moving average, consider the following credit spread trade that relies on VEEV staying above $220 (red line) through expiration in 7 weeks:

Buy to Open the VEEV 17 May 210 put (VEEV240517P210)
Sell to Open the VEEV 17 May 220 put (VEEV240517P220) for a credit of $1.80 (selling a vertical)

This credit is $0.05 less than the mid-point price of the spread at Friday’s $231.69 close.   Unless VEEV surges 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 $178.70. This trade reduces your buying power by $1,000, making your net investment $821.30 per spread ($1,000 – $178.70). If VEEV closes above $220 on May 17, the options will expire worthless and your return on the spread would be 22% ($178.70/$821.30).

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