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Dr. Terry Allen  

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  • How To Play The JPMorgan And Wells Fargo Earnings Announcements This Week [View article]
    Thank you. I will try to fix it.
    Jul 9, 2013. 08:11 AM | Likes Like |Link to Comment
  • How To Play Joy Global's Earnings Announcement [View article]
    Well, it's been eight years since my settling with the SEC (without admitting guilt, by the way), and ever since then at least 30 unregistered newsletters are having trades executed through Auto-Trade programs openly and daily. One would think that if the SEC intended to shut them down they would have done it long before now.

    The essence of Auto-Trade is that it is a contract between the customer and a broker (who is licensed). The newsletter does not participate in that contract, and is just publishing its trade recommendations for all its subscribers to see. The customer makes an agreement with the broker to honor those recommendations and execute trades in his or her account.

    Auto-Trade is something the broker offers, not the newsletter. The SEC can't go after the newsletter for expressing its opinions. The newsletter is not a party in the Auto-Trade contract.
    Jun 2, 2013. 09:56 AM | 1 Like Like |Link to Comment
  • How To Play Joy Global's Earnings Announcement [View article]
    I can only say that the SEC has one opinion but they clearly are not trying to enforce it with a lawsuit against any of the 30 or so newsletters who are openly participating in an Auto-Trade program with one or more brokers. There was a Supreme Court ruling that specifically exempted newsletter publishers from having to become registered investment advisors and the SEC would be going up against that ruling if they attempted to enforce their opinion.
    Jun 1, 2013. 12:49 PM | 1 Like Like |Link to Comment
  • How To Play Joy Global's Earnings Announcement [View article]
    Update on the JOY trades I recommended. There were 4 calendar July-13 – May5-13 calendar spreads. In an actual account at thinkorswim, here are the numbers for what we paid for these spreads and what we sold them for: 52.5 strike (cost $1.35 sold for $1.20), 55 strike (cost $1.55 sold for $2.38), 57.5 strike (cost $1.50 sold for $1.61), and 60 strike (cost $1.19 sold for $1.00). We lost money on 2 spreads but gained on 2 others, and enjoyed one big gain. The total cost of our investment was $2236 and our net gain after paying $65 in commissions was $175, or 7.8% on our investment.

    While this was quite a bit lower than the returns we made on the earlier 11 investments that resulted in gains averaging about 19% (without a single loss), most people would be happy with 7.8% for a single week after commissions. The portfolio that we traded JOY in also made an investment in COST this week and the total portfolio gained 9.6% for the week.

    The odds of making 12 successful profitable trades without a single loss is comparable to flipping a coin and getting heads 12 times in a row. The odds of that happening are one out of 4096 times. Either I have been incredibly lucky or maybe there is some merit in the Expectations Model I have developed. It’s up to you to decide.

    There are no companies with weekly options available which are announcing earnings next week so I am taking the week off.
    May 31, 2013. 11:42 PM | Likes Like |Link to Comment
  • How To Play Joy Global's Earnings Announcement [View article]
    It is easy to criticize when you don't have a full understanding of the true risks involved. Yes, the people who followed me through Auto-Trade had to invest 91% of that particular portfolio's value (it is one of 8 portfolios I trade). The spread would have made its maximum gain if the stock fell about $2. But it didn't. At the same time that earnings were announced, GMCR also announced a new 5-year contract with Starbucks and the stock soared by 25%. The portfolio gained 18% on the trade even though I was totally wrong concerning the direction the stock would take after the announcement. So while a large percentage of the portfolio value was supposedly put at risk, the "real" risk was a whole lot different.
    May 31, 2013. 10:58 PM | Likes Like |Link to Comment
  • How To Play Joy Global's Earnings Announcement [View article]
    No, I am not a registered investment advisor. I prefer to be a newsletter publisher, and I do not manage money for anyone. I merely publish my investment recommendations for my subscribers.

    I totally disagree with your criticism of the thinkorswim graphing software. You can set the IV you expect will come about after the earnings are announced (which I do, based on what IV fell to after the last earnings announcement). I every graph I publish I disclose how far I expect IV will fall, and the graph reflects that assumption.
    May 31, 2013. 10:49 PM | Likes Like |Link to Comment
  • How To Play The Costco Earnings Announcement [View article]
    Update on the Costco trade. Today before the open, Costco announced earnings of $1.04 which beat estimates of $1.02 but fell short of the $1.06 whisper number. The stock is now trading just under $113 compared to just under $115 when I wrote this article so any potential buyer of the stock would have done well to heed my advice and wait until after the announcement to buy shares.

    The diagonal option spread that I suggested was sold in our Terry's Tips portfolio for a credit of $.84. That meant for anyone buying 5 spreads, you investment would have been the $2500 maintenance requirement less $420 received from the sale, or $2080. Today we sold the spread for a debit of $.10, making $.74 per spread. After paying commissions of $25, the net gain on 5 spreads was $345, or 16.6% on the investment. This was the 11th consecutive successful earnings trade we have made using our Expectation Model, and our JOY trades could be closed out right now for a gain as well, but we are waiting until tomorrow to close it out.
    May 30, 2013. 11:53 AM | Likes Like |Link to Comment
  • How To Play Joy Global's Earnings Announcement [View article]
    Mark - You are absolutely correct in your understanding of how the brokers' Auto-Trade service works. As a newsletter publisher I don't even know how much money my subscribers have invested or even if they have invested in mirroring one or more of the eight portfolios that I carry out. Thanks for clearing it up.
    May 29, 2013. 11:55 PM | 1 Like Like |Link to Comment
  • How To Play Joy Global's Earnings Announcement [View article]
    Thank you Mark. This fellow (who hides behind a pseudonym) seems to have a vendetta against me and doesn't understand the nature of the S.E.C. process - they have to make it look really bad in their complaint but in the real world their major concern was the Auto-Trade issue where they were off base. Lots of people up here in Vermont think I am a pretty good guy - I built a swimming pool for the Boys and Girls Club and have donated over $2 million to charities in this state, for example. And the 10 consecutive winning trades I made which averaged a 20% gain were made in an actual account for all my subscribers to see (and many of them enjoyed those exact gains in their own accounts through Auto-Trade), so the "too good to be true" statement is way off base. It was indeed true.
    May 28, 2013. 05:35 PM | Likes Like |Link to Comment
  • How To Play The Costco Earnings Announcement [View article]
    You can read all about this on my Profile. Please do.
    May 27, 2013. 12:18 PM | Likes Like |Link to Comment
  • How To Play The Costco Earnings Announcement [View article]
    I'm sorry I didn't cite a more recent report - here's one from Forbes dated 4/17/13 supporting both of my statements. It's entitled "Walmart Pays Workers Poorly And Sinks While Costco Pays Workers Well And Sails - Proof That You Get What You Pay For" - "Costco’s most recent quarterly earnings report reveals a fairly healthy eight percent rate of growth in year-on-year sales—including a five percent rise in same store sales. What’s more, with membership fees rising from $459 million in the same quarter last year to $528 million this year, it’s pretty clear that a significant number of customers are moving over to the retailer to do their discount shopping.

    Meanwhile, Costco’s primary competitor, Walmart, saw an anemic 1.2 percent rise in sales, while other competitors such as J.C. Penny and Target TGT +1.53% experienced even greater disasters in their sales results."
    May 27, 2013. 12:06 AM | Likes Like |Link to Comment
  • How To Play The Salesforce.com Earnings Announcement [View article]
    A follow-up on the trades I suggested - The company announced earnings in line with estimates but the stock tanked about $3.50 after to open, making our Expectations Model a better predictor than the historical pattern which showed the stock moving higher after the announcement every time for the past four quarters even when they didn't beat estimates.

    I bought July options for the long side rather than June as the bid-ask spreads were less and IV was also lower.. We didn't do as well as I had hoped because I underestimated how far IV would fall - I expected it to fall to 40 and it fell all the way to 30. This caused a disappointing gain of 14% after commissions. However, it continued our string of successive winning earnings trades to ten without a loss, with the average gain of about 20%.
    May 25, 2013. 09:19 AM | Likes Like |Link to Comment
  • How To Play The Abercrombie & Fitch May Earnings Announcement [View article]
    A follow-up on the trades I suggested - The company announced earnings in line with estimates but the stock tanked $5.50 after to open, making our Expectations Model a better predictor than the historical pattern of an average 6.7% gain.

    I bought July options for the long side rather than June as the bid-ask spreads were less and IV was also lower. I underestimated how far IV would fall - I expected it to fall to 38 and it fell to 34. This caused a disappointing gain, of 7.6% after commissions. However, it continued our string of successive winning trades without a loss, and the same day we also made 14% with a PEA play on CRM so there are now 10 wins without a loss. Next up is JOY, the only company with weekly options announcing next week.
    May 24, 2013. 04:54 PM | 1 Like Like |Link to Comment
  • A Remarkably Reliable Way To Predict Post-Earnings Price Moves [View article]
    Your memory serves you well. We anticipated a lower stock price after the announcement and placed a diagonal spread, buying May 60 calls and selling April 57.5 for a credit of $.15. If eBay traded at any price below $57.50 the April calls would expire worthless and we would be guaranteed a gain. Unfortunately it fell so far that the May 60 calls were sold for only $.07 but that gave us a total of $.22 per spread ($220 for the 10 we placed, less commissions). It wasn't a great gain, but far better than a loss.
    May 20, 2013. 09:22 AM | Likes Like |Link to Comment
  • How To Play The Green Mountain Coffee Roasters Earnings Announcement [View article]
    If you had read my article about Green Mountain Coffee rather than just looked at the trades we made you would have seen I had done a detailed analysis of the company and concluded that earnings would be well above estimates mostly due to much lower raw coffee prices and no discounting in the single cup category. I created spreads which would make gains if the stock fell by 5% (an unlikely event given my analysis) or it it went up by any amount. It went up 25% and we gained 18.5%.

    Normally our maximum bet is 50% of portfolio value but I felt quite strongly about this particular play.
    May 20, 2013. 08:11 AM | Likes Like |Link to Comment
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