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Dear Friend,
Last week just before the Apple earnings announcement after the close on Thursday, I published an article on Seeking Alpha which suggested an options strategy to play prior to the announcement. Basically, I spoke about taking advantage of the big Implied Volatility advantage for calendar spreads, and placing long-December (IV = 74) short-November (IV = 40) calendar spreads at many strike prices, both below and above the stock price.
Today I would like to offer you a link to the follow-up article also published at Seeking Alpha.
Terry
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| Option Tip of the Week |
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Closing Out The Options Play For The Apple Earnings Announcement
Here is the link:
Closing Out The Options Play For The Apple Earnings Announcement
IV for the December options fell more than we expected after the announcement. This means that our original projections were too rosy. We were fortunate enough to make a gain on the strategy nevertheless. The learning experience was more valuable than the loss or gain.
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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?
I look forward to having you on board, and to prospering with you.
Terry
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| Andy's Market Report |
The market finished the week slightly lower. The talking heads would have you believe it was far worse, but the S&P, Dow, Nasdaq and Russell only lost -1.5%, -1.8%, -0.9% and -0.6% respectively.
Yes, if you listen to the noise created by the financial media you would think a financial Armageddon was right around the corner. Well, it’s not. The latest correction is normal...at least for now. When we see a move beyond 20% then we can start to talk about the magnitude of the correction. Until then stay focused on the strategies that have corrected. Be diligent. If you are concerned about a collapse make the appropriate adjustments.
But I think the chart below tells you all you need to know about this latest correction.
We have seen a preposterous gain on the backs of the largest stimulus injections in history. Unfortunately, the latest QE ‘til infinity hasn’t panned out, at least for now.
And now we have a third quarter earnings well below expectations. IBM, McDonald’s, Fed Ex, Google, Intel, Amazon, Caterpillar...you name the company and the chances are pretty good that they disappointed Wall Street.
Moreover, Apple, the largest company has lost over 100 points in roughly a month. Apple’s chart looks eerily similar to the S&P so it can be said, at least recently, that as Apple goes the market goes.
The market doesn’t go up forever. Common sense, right? Unfortunately, common sense is often thrown out the window when corrections occur and panic sets in.
As options traders who sell premium as part of their strategy, corrections are sometimes welcome. Now is certainly one of those times. The welcoming mat has been out for quite some time, but the market refused to enter. The VIX, investor’s fear gauge, has been near historical lows for quite some time which makes it very difficult for those of us trying to sell premium. But, now with a pop in the VIX to over 18 we can start to see a little light ahead. My hope is that the VIX can make it above 20 and we can stay above those levels. Terry’s 10K strategy thrives in a high implied volatility environment. So again, stay focused and use the increase in implied volatility to your advantage. Sell premium for higher prices, widen your strikes, ,etc. All of this is possible with a higher VIX. So don’t fret over a slight correction, welcome it.
Earnings season is now half over, so the focus on profits should subside next week as investors turn their attention to the coming election and more importantly, the Friday's jobs report, the last major data release before the November 6 contest.
As we move closer and closer to the election I would expect volatility as seen by the VIX to increase. Again, this can be a good thing. The jobs report could also help to push the VIX higher.
Expectations for the next nonfarm payrolls report are set for release on Friday. Analysts expect 124,000 jobs were added in October - up 10,000 from September. However, the unemployment rate is also seen ticking higher - to 7.9 percent from 7.8 percent.
A payroll surprise in either direction could further cloud expectations for the election's outcome.
So, the message is avoid the noise, stay focused, welcome increase volatility and use it to your advantage...Terry does in his strategies and so should you. |
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| Testimonial of the Week |
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“I remain a great fan of your system and approach, and have recommended Terry's book and approach to more than a few of my trading buddies. I appreciate all you have taught me.”
~ Doug
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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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