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Dear Friend,
Last week I told you about a bullish short-term bet we made on SVXY because the stock had dropped over $3 in the previous week (and historically, 4 out of 5 times when that happened earlier this year, the stock rose at least $3 in the subsequent week). We placed an order to sell half the calls if they had doubled in price, and that occurred on Tuesday. On Thursday, volatility soared due to the plane being shot down over Ukraine and Israel invading Gaza. It looked like we would just break even on the trade since we had recovered the initial investment, but then, on Friday, the stock rallied $6 and we were able to sell the remaining half for enough to give us a 32% gain on the trade. Not as much as we had originally hoped, but a gain of any sort is always welcome.
Terry
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| Option Tip of the Week |
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Finding Lessons in a Trade:
The big lesson from our experience last week, one that we have had many times, is that there is nothing wrong with taking all or some of your gains off the table when you can. We were hoping for a 200% gain on the call purchase but sold half of our positions when the price had doubled. This insured that we would break even at worst. Anything we could sell the remaining calls for would be profit.
If we had not taken the gain on Tuesday, it would have been a losing week. As the old saying goes, the bears make money and the bulls make money but the pigs get slaughtered.
As I write this Monday morning, SVXY has fallen another $3.50. Does that mean we should buy a short-term call in hopes that it will go higher by at least $3 in the next week? Not necessarily. This time around, the drop in SVXY (caused by a spike in options market volatility – VIX has gained 12% today) does not seemed to be caused by a specific world event like it was last Thursday. This time, it feels like a growing unrest of the market in general is taking place, and volatility might not fall back as quickly as it did last week. This time around, we do not advise making a bet that volatility will fall in the very short term. Best to sit on the sidelines when a spike in volatility does not seem to have occurred from a specific event that will most likely be forgotten in a few days.
On another subject, have you got your free report entitled 12 Important Things Everyone with a 12 Important Things Everyone with a 401(K) or IRA Should Know (and Probably Doesn’t)? This report includes some of my recent learnings about popular retirement plans and how you can do better. Order it here. You just might learn something (and save thousands of dollars as well).
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Any questions? I would love to hear from you by email (terry@terrystips.com), or if you would like to talk to our guy Seth, give him a jingle at 800-803-4595 and either ask him your question(s) or give him your thoughts.
You can see every trade made in 8 actual option portfolios conducted at Terry’s Tips and learn all about the wonderful world of options by subscribing here. Why wait any longer to make this important investment in yourself?
Even better, you can become a Terry’s Tips Insider, and receive all our educational reports and materials absolutely free by opening a new account at the best options broker around - thinkorswim. If you open an account with our link, they will give you 60 days of free trading or up to $600, the same deals they give to everyone who opens an account with them. You must use this link to sign up - open thinkorswim account – and once you have funded your account with at least $3500, email Seth@TerrysTips.com and let him know that you have done it, and this is what he will do – sign you for our Premium Service package ($119.95 value plus an extra 4 months of our Premium Service, valued at another $190.80). You get $300.65 worth of services without paying us one penny.
I look forward to having you on board, and to prospering with you.
Terry
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open thinkorswim account
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| Overbought/Oversold report |
Overbought/Oversold as of July 21, 2014
• S&P 500 (SPY) – 47.8(Neutral)
• Dow Jones (DIA) – 43.9 (Neutral)
• Russell (IWM) – 37.5 (Neutral)
• NASDAQ 100 (QQQ) – 57.4 (Neutral) |
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| Testimonial of the Week |
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I have been auto trading your service since Oct 2011 and am pleased with the results ~ David
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Thank you again for being a part of the Terry's Tips newsletter. If you are interested in signing up as an Insider, visit Terry's Tips today for details.
Sincerely,
Dr. Terry Allen
Terry's Tips
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| Week 320 |
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| In This Issue |
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Hot off the press! Could be the best book on options you will ever read.
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