Bullish stock option strategies
Follow Terry's Tips on Twitter. Like Terry's Tips on Facebook. Watch Terry's Tips on YouTube. I will reveal the exact positions we have in this portfolio, their original cost, and our reasoning for putting them on.
It is not our best performing portfolio, but it exceeds the average gain of Our Honey Badger portfolio is one of our most aggressive least conservative. We select strike prices which are just below the then-current stock price so we can tolerate a small drop in the price while we hold the positions. Here are the exact words we published in our June 3, Saturday Report which reviews performance of all nine portfolios:.
It will be our most aggressive portfolio. Results for the week: The big gain this week came about because of the surge in AVGO which makes the spread almost certain to make the maximum gain when it expires in three weeks.
All three stocks in this portfolio are comfortably above the price then need to be to achieve the maximum gain.
Since the IBD Top 50 list is such an important source for this portfolio, we keep a careful watch on the stocks which are added on to the list each week and which ones are deleted. Over time, we hope to determine whether deletions might be good prospects for bearish spreads.
Momentum often works in both directions, and perhaps stocks which had strong upward momentum will have strong downward momentum when IBD determines that the upward trend has ended. We hope you enjoyed this peek at one of our portfolios, and the strategy we use in this portfolio. Our results include all commissions as well most newsletters conveniently ignore commissions to make their results look better. We invite you to come on board and share in our success.
AMAT , ANET , AVGO , Bullish Options strategies , Calls , Credit Spreads , HQY , implied volatility , LEAPS , LRCX , Monthly Options , NVDA , Portfolio , Profit , profits , Puts , Risk , Stocks vs. By the way, we have 9 portfolios that we carry out for paying subscribers where they can see every trade including commissions as we make them. All of these portfolios have made positive gains so far in , and the composite average has picked up Not bad compared to conventional investment results.
The Motley Fool guys have written over articles on the company and include it in their top three beauty stocks.
The company has a plan to add on new stores, and they have exceeded earnings estimates every quarter for the past year. The chart for the last year shows a steady climb upward, but there have been some setbacks along the way:. While this might not be much downside protection, it is surely a lot better deal than owning the stock where even a dollar drop in the stock will result in a loss for the period. If that becomes necessary, we will send you a note explaining the action we took. As with any investment, you should do your own research on the fundamentals of any stock or options you buy, and you should only be risking money that you can truly afford to lose.
This has resulted in unusually high short-term option prices for USO the stock that mirrors the price of oil. I would like to share with you an options spread I made in my personal account today which I believe has an extremely high likelihood of success.
I personally believe that the long-run price of oil is destined to be lower. The world is just making too much of it and electric cars are soon to be here Tesla is gearing up to make , next year and nearly a million in two years. But in the short run, anything can happen. Meanwhile, OPEC is trying to coax producers to limit supply in an effort to boost oil prices.
Every time they boast of a little success, the price of oil bounces higher until more evidence comes out that not every country is on board. Many oil-producing companies have hated one another for centuries, and the idea of cooperating with each other seems a little preposterous to me. The good old U. Two significant new domestic oil discoveries have been announced in the last couple of months, and the total number of operating rigs has moved steadily higher in spite of the currently low oil prices.
Bottom line, option prices on USO are higher than we have seen them in quite a while, especially the shortest-term options. Implied volatility IV of the long-term options I would like to buy is only 36 compared to 64 for the shortest-term weekly options I will be selling to someone else. Given my inclination to expect lower rather than higher prices in the future, I am buying both puts and calls which expire a little over a year from now and selling puts and calls which expire on Friday.
Buy To Open 20 USO 19Jan18 10 calls USOC10 Sell To Open 20 USO 02Dec16 Of course, you can buy just one of each of these spreads if you wish, but I decided to pick up 20 of them. Here is the risk profile graph which shows what my spreads should be worth when the short options expire on Friday:.
Bullish and Bearish Option Trading Strategies | Ally
If these short-term option prices hold up for a few more weeks, I might be able to duplicate these possible returns many more times before the market settles down. As usual, I must add the caveat that you should not invest any money in options that you cannot truly afford to lose. Options are leveraged investments and can lose money, just as most investments. I like my chances with the above investment, however, and look forward to selling new calls and puts each week for a little over a year against my long options which have over a year of remaining life.
Halloween Special Expires at Midnight Tonight. This report details how our 13 actual portfolios perform each week. Last week was a down one for the market SPY lost 0. Others did considerably better.
The portfolio based on Facebook FB gained 8. One of our portfolios invests in companies which are about to announce earnings, and closes out the positions on the Friday after the announcement.
Last week, we closed out our spreads in Mastercard MA which had been put on only a week and a half earlier. We enjoyed a gain of Finally, we have a portfolio that is designed as protection against a market crash or correction.
While SPY fell only 0. Watching how these portfolios unfold over time in the Saturday Report is a wonderful and easy way to learn the intricacies of option trading. You can get started today by coming on board at our half-off Halloween Special which expires at midnight tonight. I will personally send you the October 29 th Saturday Report so you can start immediately. Most of these portfolios employ what we call the 10K Strategy. It involves selling short-term options on individual stocks and using longer-term or LEAPS as collateral.
The 10K Strategy is sort of like writing calls on steroids. It is an amazingly simple strategy that really works with the one proviso that you select a stock that stays flat or moves higher over time.
As a Halloween special, we are offering the lowest subscription price than we have ever offered — our full package, including several valuable case study reports, my White Paper , which explains my favorite option strategies in detail, and shows you exactly how to carry them out on your own, a day options tutorial program which will give you a solid background on option trading, and two months of our Saturday Report s full of tradable option ideas.
If you are ready to commit for a longer time period, you can save even more with our half-price offer on our Premium service for an entire year. This special offer includes everything in our basic service, and in addition, real-time trade alerts and full access to all of our portfolios so that you can Auto-Trade or follow any or all of them.
We have several levels of our Premium service, but this is the maximum level since it includes full access to all nine portfolios which are available for Auto-Trade.
Use the Special Code MAX16P. This is a time-limited offer. You must order by midnight tonight, October 31, This is the perfect time to give you and your family the perfect Halloween treat that is designed to deliver higher financial returns for the rest of your investing life. I look forward to helping you survive Halloween by sharing this valuable investment information with you at the lowest price ever. It may take you a little homework, but I am sure you will end up thinking it was well worth the investment.
Do it today, before you forget and lose out. This offer expires at midnight tonight, October 31, Auto-Trade , Bearish Options Strategies , Bullish Options strategies , Calendar Spreads , Calls , diagonal spreads , ETF , ETP , FB , implied volatility , Monthly Options , Portfolio , Profit , profits , Puts , Risk , SPY , Stocks vs. This week we will continue our discussion of a popular option spread — the calendar spread which is also called a time spread or horizontal spread.
We will check out the feasibility of buying spreads at different strike prices in an effort to reduce risk. Here is what the risk profile graph looks like for the three spreads:. Note that the break-even range is almost exactly the same with the three spreads. Presumably, you are trading calendars on a stock you believe is headed higher. You might choose to buy an at-the-money calendar and a second one at a higher strike.
If you are bullish on the stock, this seems to be a better way to go. The best thing about this choice of two spreads is that the maximum gain can be achieved across a 5-point range rather than being available at only one precise price point.
Another strategy might be to buy the calendar spread, and then wait to see which way the stock moves, and then buy another calendar in that direction.
The big risk with this strategy is that the stock might whipsaw. As usual, there are no easy ways to make sure gains in this world. The best bet seems to be to take a position that the stock is headed in one particular direction usually up unless you are trading on some ETP that is destined to go down, like VXX , and combine an at-the-money spread with one at a higher strike price.
Most months you should be making a significant gain if your stock behaves as you expect, and that gain can materialize over a nice range of possible prices. This week I would like start an ongoing discussion about one of my favorite option plays.
It is called a calendar spread. It is also known as a time spread or a horizontal spread. On a specific date on the calendar, you discover whether you made or lost money since you first bought the calendar spread. In the next few blogs, I will discuss all sorts of variations and permutations you can make with calendar spreads, but today, we will focus on a bare bones explanation of the basic spread investment.
All About, or at Least an Introduction to Calendar Spreads. A calendar spread consists of the simultaneous purchase of one option either a put or a call and the sale of another option either a put or call , with both the purchase and the sale at the same strike price, and the life span of the option you bought is greater than the option you sold.
You can trade either puts or calls in this kind of spread, but not both in the same spread. Some things that we all know about options: This is called decay. In option parlance, it is called theta. Theta is the amount that the option will decay in value in a single day if the underlying stock remains flat. The basic appeal of a calendar spread is that the decay or theta of the option that has been sold is greater than the decay or theta of the stock that was bought.
Every day that the stock remains flat, the value of the spread should become slightly greater. For this reason, most buyers of calendar spreads are hoping that the stock does not move in either direction very much but we will see that is not always the case with all calendar spreads. The options that are being bought will expire on January 21, about 5 months from now and the options being sold will expire on September 23, , one month from now.
The all-important date of this spread is September 23, That is the day on which the short options the ones you sold will expire. Here is the risk profile graph which shows the loss or gain on the original spread at various prices where the stock might be trading on September 23rd:. One good thing about calendar spreads is that the value of the options you bought will always be greater than the ones you sold, so you can never lose the entire amount of money you invested when you bought the spread.
Even worse, in most cases, you would lose the entire investment if the stock stays flat rather than moving in the direction you were hoping. There is a range of possible prices where your spread will be profitable, and if you enter your proposed spread in a software program like the free Analyze Tab at thinkorswim , you can tell in advance what the break-even range will be for your investment.
There are ways that you can expand the break-even range so that a greater stock price fluctuation could be tolerated, and that will be the subject of our next blog. Auto-Trade , Bearish Options Strategies , Bullish Options strategies , Calendar Spreads , Calls , diagonal spreads , ETF , implied volatility , LEAPS , Monthly Options , NKE , Portfolio , Profit , Puts , Risk , Stocks vs.
Two weeks ago, LinkedIn LNKD issued poor guidance while at the same time announced higher than expected earnings. Investors clobbered the stock, focusing on the guidance rather than the earnings.
At the same time, as is often the case, another company in the same industry, Facebook FB was also traded down. Today, a similar thing took place. Walmart WMT announced earnings which narrowly beat estimates, but missed top line revenue by a bit. However, they projected that next quarterly earnings starting now would be flat.
The stock fell 4. Costco COST is also a retailer, and many investors believe that as Walmart goes, so will Costco. This how the lemmings do it, time and time again. That seemed to be an over-reaction to me.
COST is a much different company than WMT. COST is adding on new stores every month while WMT is in the process of closing stores, for example. WMT has a much greater international exposure than COST, and the strong dollar is hurting them far more. I expect cooler heads will soon prevail and COST will recover.
This is called selling a bull put credit spread. Any ending price above this will be profitable and any ending price below this will result in a loss. Higher risk and higher reward. The stock needs to move a bit higher for you to make the maximum gain. I feel more comfortable knowing it can fall a little and still give me a seriously nice gain for a single month.
By the way, these trades can be made in an IRA if you have a broker like thinkorswim which allows options spread trading in an IRA. If you make either of these trades, please be sure you do it with money you can truly afford to lose.
Options are leveraged instruments and often have high-percentage gains and losses. With spreads like the above, at least you know precisely what the maximum loss could be. Auto-Trade , Bullish Options strategies , Calls , Credit Spreads , ETP , Monthly Options , Portfolio , Profit , profits , Puts , Risk , Stocks vs.
The market is closed for the Marin Luther King holiday today, and maybe you have a little time to see how we plan to make some exceptional returns by playing what might happen with oil prices. It is a long-term bet that the price of oil will eventually recover from its recent year lows, but maybe it will get even worse in the short run before an eventual recovery takes place. In the wonderful world of stock options, you can bet on both possibilities at once, and possibly make double-digit monthly gains while you wait for the future to unfold.
I hope you enjoy my thinking about an option strategy based on the future of oil prices. Nobel Laureate Yale University professor Robert Shiller was interviewed by Alex Rosenberg of CNBC on July 6, He delivered his oft-repeated message that he believed that both stocks and bonds were overvalued and likely to fall.
The last couple of weeks in the market makes his forecast seem pretty accurate. And then he continued on to say that he thought that oil would be a good investment, and that he was putting some of his own money on a bet that oil prices would move higher in the long run.
So how has his advice turned out? It is almost exactly half of that amount today. We might wonder how Mr. Shiller feels about losing half his money in six months. I like the idea of getting into oil at a price which is half of what this apparently brilliant man bought it for, and also would like to benefit if the steady drop in the price of oil might continue a bit longer in the short run.
Iran is scheduled to start dumping lots of its oil on the world market as the sanctions are removed, and OPEC has shown no inclination to reduce production in its effort to discourage American frackers who have a higher cost of production. If the supply of oil continues to grow at a faster rate than demand, lower prices will probably continue to be the dominant trend, at least until a major war or terrorist action breaks out, or OPEC changes its tune and cuts back on production.
If oil costs more to produce than it can be sold for as OPEC asserts , then eventually supply must shrink to such a point that oil prices will improve. Intuition would tell us that lower gas prices in the U. One would think that this would stimulate the economy and be good for the stock market. Apparently, it has not worked out that way.
The recent drop in the stock market was supposedly due to fears of weakness in international economies. Many of them are dependent on oil revenues, and they are in bad shape with oil so cheap. It makes sense to me that at some point, supply and demand must even out, and a price achieved that is at least as high as the average cost of getting oil out of the ground.
This is more than double the current selling price of oil. It seems logical to believe that sometime in the future, this number will once again be reached. If that is the case, USO should be double what it is now. Buy To Open 7 USO Jan 8 calls USOC8 Sell To Open 7 USO Mar The first spread the diagonal is set up to provide upside protection.
If that happens, those calls we sold will expire worthless and we will be in a position to sell new calls that expire a month later at the same strike. No matter where the stock ends up, we will sell new calls at the February expiration, most likely in the March series at the 8 strike price. We will have 21 opportunities to sell new monthly premium to cover the original cost.
The long side of the calendar spread the Jan calls will always have a value which is greater than the short-term calls that we sell at the 8 strike price. When the Mar Presumably, we will be selling short term one or two month calls at increasingly higher strike prices as the stock moves higher in the long run, collecting new premium and watching the value of our long Jan 8 calls increase substantially in value as they become more and more in the money.
This is the risk profile graph which shows what we should make or lose at various possible stock prices in 5 weeks when the Feb calls expire:. USO Risk Profile Graph Jan Most months, this should be possible.
This explanation may be a little confusing to anyone who is not familiar with stock options. It takes a little effort, but it could change your investment returns for the rest of your life. Bullish Options strategies , Calendar Spreads , Calls , diagonal spreads , ETP , LEAPS , Monthly Options , Portfolio , Profit , profits , Risk , Stocks vs. You can access this report here. There is a lot of material to cover in the report and videos, but I hope you will be willing to make the effort to learn a little about a non-traditional way to make greater investment returns than just about anything out there.
First Saturday Report with October Results. Here is a summary of how well our 5 stock-based portfolios using our 10K Strategy performed last month as well as for their entire lifetime:. Enjoy the full report here. If you missed it last week, be sure to check out the short video which explains why I like calendar spreads.
Bearish Market | Options Trading Strategies at optionsXpress
This week I have followed it up with a second video entitled How to Make Adjustments to Calendar and Diagonal Spreads. I hope you will enjoy both videos. Making Adjustments to Calendar and Diagonal Spreads. When we set up a portfolio using calendar spreads, we create a risk profile graph using the Analyze Tab on the free thinkorswim trading platform.
Bullish and Bearish Option Trading Strategies | Ally
The most important part of this graph is the break-even range for the stock price for the day when the shortest option series expires. If the actual stock price fluctuates dangerously close to either end of the break-even range, action is usually required.
The simple explanation of what adjustments need to be made is that if the stock has risen and is threatening to move beyond the upside limit of the break-even range, we need to replace the short calls with calls at a higher strike price. If the stock falls so that the lower end of the break-even range is threatened to be breached, we need to replace the short calls with calls at a lower strike.
There are several ways in which you can make these adjustments if the stock has moved uncomfortably higher:. Sell the lowest-strike calendar spread and buy a new calendar spread at a higher strike price, again checking with the risk profile graph to see if you are comfortable with the new break-even range that will be created. The calendar spread you are buying will most likely cost more than the calendar spread you are selling, so a small amount of new capital will be required to make this adjustment.
Buy a vertical call spread, buying the lowest-strike short call and selling a higher-strike call in the same options series weekly or monthly. This will require a much greater additional investment. Sell a diagonal spread, buying the lowest-strike short call and selling a higher-strike call at a further-out option series. This will require putting in much less new money than buying a vertical spread.
There are similar ways in which you can make these adjustments if the stock has moved uncomfortably lower. However, the adjustment choices are more complicated because if you try to sell calls at a lower strike price than the long positions you hold, a maintenance requirement comes into play.
Here are the options you might consider when the stock has fallen:. Sell the highest-strike calendar spread and buy a new calendar spread at a lower strike price, again checking with the risk profile graph to see if you are comfortable with the new break-even range that will be created. Sell a vertical call spread, buying the highest-strike short call and selling a lower-strike call in the same options series weekly or monthly. This requirement is reduced by the amount of cash you collect from selling the vertical spread.
Sell a diagonal spread, buying the highest-strike short call and selling a lower-strike call at a further-out option series. This will require putting in much less new money than selling a vertical spread. Auto-Trade , Bullish Options strategies , Calendar Spreads , Calls , diagonal spreads , ETF , Monthly Options , Portfolio , Profit , Puts , Stocks vs.
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. Allen believes that the 10K Strategy is less risky than owning stocks or mutual funds, and why it is especially appropriate for your IRA.
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. Neither tastyworks nor any of its affiliated companies is responsible for the privacy practices of Marketing Agent or this website.
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. Vermont website design, graphic design, and web hosting provided by Vermont Design Works. Here are the exact words we published in our June 3, Saturday Report which reviews performance of all nine portfolios: IBD Underlying Updates June The chart for the last year shows a steady climb upward, but there have been some setbacks along the way: ULTA Chart April Here is the risk profile graph which shows what my spreads should be worth when the short options expire on Friday: USO Risk Profile Graph December Lowest Subscription Price Ever As a Halloween special, we are offering the lowest subscription price than we have ever offered — our full package, including several valuable case study reports, my White Paper , which explains my favorite option strategies in detail, and shows you exactly how to carry them out on your own, a day options tutorial program which will give you a solid background on option trading, and two months of our Saturday Report s full of tradable option ideas.
Calendar Spreads Tweak 1 Thursday, September 1st, This week we will continue our discussion of a popular option spread — the calendar spread which is also called a time spread or horizontal spread. Face book Risk Profile May All About, or at Least an Introduction to Calendar Spreads Thursday, August 25th, This week I would like start an ongoing discussion about one of my favorite option plays.
Terry All About, or at Least an Introduction to Calendar Spreads A calendar spread consists of the simultaneous purchase of one option either a put or a call and the sale of another option either a put or call , with both the purchase and the sale at the same strike price, and the life span of the option you bought is greater than the option you sold.
Here is the risk profile graph which shows the loss or gain on the original spread at various prices where the stock might be trading on September 23rd: Here is what I did for each contract: Terry Making a Long-Term Options Bet on Oil Nobel Laureate Yale University professor Robert Shiller was interviewed by Alex Rosenberg of CNBC on July 6, This is the risk profile graph which shows what we should make or lose at various possible stock prices in 5 weeks when the Feb calls expire: Terry First Saturday Report with October Results Here is a summary of how well our 5 stock-based portfolios using our 10K Strategy performed last month as well as for their entire lifetime: First Saturday Report October Results Making Adjustments to Calendar and Diagonal Spreads Thursday, October 29th, If you missed it last week, be sure to check out the short video which explains why I like calendar spreads.
Terry Making Adjustments to Calendar and Diagonal Spreads When we set up a portfolio using calendar spreads, we create a risk profile graph using the Analyze Tab on the free thinkorswim trading platform.
There are several ways in which you can make these adjustments if the stock has moved uncomfortably higher: Here are the options you might consider when the stock has fallen: Search Blog Search for: Stock Options Straddles Strangles Terry's Tips thinkorswim VIX Volatility VXX Weekly Options Weekly vs. Monthly Options William Tell. Success Stories I have been trading the equity markets with many different strategies for over 40 years.