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Dear Friend,
Today I would like to share with you one startling fact about Apple stock and a relatively low-risk way to earn over 50% in one year with a simple options trade.
In a world when most people are complaining that it is really difficult to make a nickel in this market, options still offer alternatives that you are unlikely to find anywhere else.
Terry
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| Option Tip of the Week |
An Interesting Statistic for Apple (AAPL)
AAPL has fluctuated all over the place for the past several years. Most of the movement has been to the upside, but there have been serious downdrafts as well. Following last April’s earnings announcement, for example, the stock rose to a new high of about $644 and then proceeded to fall about $100 over the next two months.
One thing has been constant, however, and knowing about it could be the most profitable idea you will encounter this year. Here it is - ever since the market meltdown in late 2008 – there is not a single six-month period of time when the price of AAPL was less at the end of the six-month period than it was at the beginning of that period. True, the stock tumbled about $100 from its high reached just after the April 2012 earnings announcement, but it has now more than recovered that entire loss and moved much higher (and we have not reached the six-month mark yet).
For the past 3 ½ years, there has never been a six-month period when AAPL was lower at the end of the six months than at the beginning of that stretch. Think about that. If you could count on that pattern continuing, it would be possible to make a single option trade, wait six months, and expect a significant gain at that time.
In June of this year when AAPL was trading about $575, I told my paying subscribers about a spread that I had personally placed (using large amounts of cash, in fact) in my family charitable trust account. I placed what is called a vertical call spread on AAPL. I bought AAPL 550 calls which would expire on January 18, 2013 (about 7 months away) and sold AAPL 660 calls with the same expiration date.
I paid just under $24 for the vertical spread ($2400 per contract). If, seven months later, AAPL was at any price above $600, I would be able to sell the spread at exactly $50 ($5000 per contract). If AAPL had not gone up, and was only at the current price ($575), the spread would be worth $25, and I would still make a small gain.
Of course, since that time, AAPL has moved much higher. Now I am in a position where the stock could fall by $65 a share between now and January 18, 2013 and I will still double my money.
The spread I purchased for $24 is now trading for about $40. I am still recommending to my risk-averse subscribers that it still might be a good investment, even at this price. If you were to purchase the same spread for $40 or less, you would make 20% on your investment in January even if the stock were to fall by $65 during that time.
Meanwhile, my charitable trust account is prospering. In two short months, its value has increased by 60%. There will be a lot of happy Vermont charities when I send out donations at the end of this year.
Next week, I will discuss my latest thoughts on exactly which vertical spreads I would buy right now on AAPL to take advantage of the unusual pattern that is the subject of this week’s Idea of the Week.
There are many other ways that you can use options to make extraordinary gains when you feel fairly certain that a stock is headed higher. One of our 8 portfolios is a bullish bet on AAPL. Over the past five weeks, the stock has moved 13.3% higher, and this actual portfolio (mirrored by a large number of Terry’s Tips subscribers) has gained 360%. Our portfolio has gained 27 times as much as the stock has gone up.
To celebrate the re-establishment of Auto-Trade at TD Ameritrade/thinkorswim, we are offering our Premium service at the lowest price in the history of our company. We have never before offered such a large discount. If you ever considered becoming a Terry’s Tips Insider, this would be the absolute best time to do it.
And now for the Special Offer – If you make this investment in yourself by midnight, September 4, 2012, this is what happens:
1) For a one-time fee of only $75.95, you receive the White Paper (which normally costs $79.95 by itself), which explains my favorite option strategies in detail, 20 “Lazy Way” companies with a minimum 100% gain in 2 years, mathematically guaranteed, if the stock stays flat or goes up, plus the following services:
2) Two free months of the Terry’s Tips Stock Options Tutorial Program, (a $49.90 value). This consists of 14 individual electronic tutorials delivered one each day for two weeks, and weekly Saturday Reports which provide timely Market Reports, discussion of option strategies, updates and commentaries on 8 different actual option portfolios, and much more.
3) Emailed Trade Alerts. I will email you with any trades I make before I make them so you can mirror them yourself or have them executed for you by TD Ameritrade/thinkorswim through their Auto-Trade program. These Trade Alerts cover all 8 portfolios we conduct.
4) Access to the Insider’s Section of Terry’s Tips, where you will find many valuable articles about option trading, and several months of recent Saturday Reports and Trade Alerts.
5) A FREE special report “How We Made 100% on Apple in 2010-11 While AAPL Rose Only 25%”.
6) A free copy of my e-book, Making 36%: Duffer’s Guide to Breaking Par in the Market Every Year, In Good Years and Bad (2012 Updated Version).
With this one-time offer, you will receive all of these Premium Service benefits for only $75.95, (normal price $119.95). I have never made an offer anything like this in the eleven years I have published Terry’s Tips. But you must order by midnight on September 4, 2012. Click here, and enter Special Code Auto12 in the box on the right side of the screen.
I feel confident that this offer could be the best investment you ever make in yourself. Celebrate the resumption of Auto-Trade at TD Ameritrade/thinkorswim with us. But do it before the day after Labor Day, as this offer will not be available after that day.
I look forward to prospering with you.
Terry
P.S. If you would have any questions about this offer or Terry’s Tips, please call Seth Allen, our Senior Vice President at 800-803-4595. Or make this investment in yourself at the lowest price ever offered in our 11 years of publication – only $75.95 for our entire package (regular price $119.95) using Special Code Auto12.
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| Andy's Market Report |
From early June through last Monday the S&P 500 rallied over 11%.
The move was anything but spectacular. In fact, the seasonal low-volume, late August trading was in full effect...slow, steady, and well...boring. The S&P 500 pulled back from an intraday high of 1,426 to roughly 1,400 Thursday which equated to less than a 2% loss, but it was enough to remind investors/traders that an advance without conviction can often lead to disaster.
We are far from what would be considered disastrous, but with the S&P back down at 1400 we should once again start to watch the market closely to see how it reacts around these levels.
A break below 1400 and ultimately 1375 should lead to a decent sell-off heading into the elections. A push back above 1425 should lead to a steady climb higher as more and more bulls should become comfortable participating in the market.
But it should be noted that e S&P broke a six-week string of gains led by conflicting perceptions of the Fed’s commitment to provide more stimulus to the market.
While the losses were not close to extreme, the bears were able to push the S&P 500 lower 0.5%. The pullback in the market benchmark caused the other major indices to follow suit. Now the S&P sits at $1,411.
After four straight days of losses the market managed to climb higher on Friday. News the European Central Bank is considering setting targets in a new bond-buying program and continued hopes of more stimulus from the Federal Reserve led to the bounce. However, after four straight days of losses the market was in a “very oversold” state so a short-term bounce was expected.
Now that we have the bounce and are back in a neutral state it will be very interesting to see where the market takes us over the next few weeks. My thought is lower, at least to the 1375 level, but as I stated earlier a move back above 1425 and we should begin to look for 1450 in the near future.
All of this could become very clear next week as the annual economic symposium at Jackson Hole, Wyoming is due to occur. Bernanke and ECB President Mario Draghi will speak.
The ECB will discuss yield targets under a new bond-buying program which they are hoping will shield the their strategy and avoid speculators trying to cash in. However, any real decision would not be made before the ECB's September 6 policy meeting.
"If there can be a nice balance of stimulus that keeps interest rates low, as opposed to throwing more debt at the problems in Europe, and some level of austerity, Europe can get out of this tangle. But that balance is really the key," said Bryant Evans, investment advisor and portfolio manager at Cozad Asset Management, in Champaign, Illinois.
The reasons really don’t matter for us. Only the reaction around the 1400 level. As we head into September more volume should kick in and that means conviction will once again be at the forefront.
One thing is certain, expect to see more volatility enter the market. |
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| Overbought/Sold Condition Report |
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Overbought/Oversold as of August 24, 2012
• S&P 500 (SPY) – 44.1 (neutral)
• Dow Jones (DIA) – 47.2 (neutral)
• Russell 2000 (IWM) – 38.7 (neutral)
• NASDAQ 100 (QQQQ) – 42.3 (neutral)
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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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