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Dr. Terry Allen

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  • A Volatility Play With Significant Upside Should We Go Off The Fiscal Cliff [View article]
    Options on VIX are a much better to provide volatility insurance because you don't have to worry about contango. See my article published today by SA - Black Swan Insurance That Might Pay Off Even if There's No Crash. It makes 50% in one month even if VIX does not move higher, and more if it does.
    Dec 3 11:18 AM | 2 Likes Like |Link to Comment
  • Black Swan Insurance That Might Pay Off Even If There Is No Crash [View article]
    VIX has never been that low and probably never will be. There will always be market volatility no matter how complacent people get. On the other hand, VXX will surely get that low sometime soon.
    Dec 3 08:06 AM | Likes Like |Link to Comment
  • Intel Inside The Apple iPad? It Makes Sense! [View article]
    Great comments. Thank you.
    Dec 2 09:16 AM | Likes Like |Link to Comment
  • A Dynamite Options Strategy To Play The Green Mountain Coffee Roasters Earnings Announcement [View article]
    As you can expect, I did very well on the diagonals I placed earlier but lost money on the calendars (even though they were at higher strikes than the stock at the time). In total, I made about 40% on my investment for the month which I will take any time. I now hold March - Dec1-12 Weekly calendars at every strike from 35 to 38 as well as the Jan-Dec calendars at much lower strikes (they have essentially no value so I have not closed them out - who knows, the stock may crash in the next three weeks and they will be worth something.

    The March options cost a little over $5 and you can collect about $1 in premium for the at-the-money Weeklys and do it 15 times by owning the March options. Feels good to me.
    Dec 2 09:01 AM | Likes Like |Link to Comment
  • A Dynamite Options Strategy To Play The Green Mountain Coffee Roasters Earnings Announcement [View article]
    I expect to close out everything at the December expiration.
    Nov 21 07:56 AM | Likes Like |Link to Comment
  • A Dynamite Options Strategy To Play The Green Mountain Coffee Roasters Earnings Announcement [View article]
    I agree completely - the drop could be significant. The vertical spreads, however, which make up the great majority of the money at risk, would be exempt from the IV crash.
    Nov 20 09:47 PM | 1 Like Like |Link to Comment
  • A Dynamite Options Strategy To Play The Green Mountain Coffee Roasters Earnings Announcement [View article]
    You may be right and I hope you are. Just as long as it doesn't fall more than 10% I will be a happy (and richer) camper.
    Nov 20 08:01 PM | Likes Like |Link to Comment
  • How To Use Options To Buy Fiscal Cliff Insurance Protection [View article]
    This strategy is essentially the same as my earlier article although I have added some calendar spreads selling weekly options to generate short-term revenue to assure that a small gain results if the market moves higher.

    VXX can fall about 15% before any loss would occur on the downside (on the upside, the higher the better). With VIX already low by historical standards, I think VXX is unlikely to fall by this amount in the next 5 weeks no matter how spectacular the rally might be. Of course, I never believed AAPL would fall as far as it has, either.
    Nov 13 08:44 AM | Likes Like |Link to Comment
  • How To Use Options To Buy Fiscal Cliff Insurance Protection [View article]
    You pose an interesting question, but volatility is hard to predict. If a deal is reached in Congress,volatility is bound to plummet (although it is pretty low already) while no deal means much higher volatility. It's a crapshoot guess at this point.

    Enjoy your studying.

    Terry
    Nov 12 08:20 PM | 1 Like Like |Link to Comment
  • How To Use Options To Buy Fiscal Cliff Insurance Protection [View article]
    Thanks for you words of support. I don't get them often. Most people complain that the strategies are so complex (and convoluted to many).
    Nov 12 05:11 PM | Likes Like |Link to Comment
  • A Timely Test Of The Ultimate Hedge Against A Market Crash [View article]
    I wouldn't sell puts on VXX because it historically tanks over time. Jan-14 puts would be especially bad to sell. The portfolio I suggested is far better because it makes a small gain over a large range of possible stock prices (including a drop of over 10%) yet offers huge gains if the market does seriously tank.
    Nov 10 04:18 PM | Likes Like |Link to Comment
  • The Ultimate Protection Hedge Against A Market Crash? [View article]
    Yes, you buy them outright. Covered calls are like covered stock - there is some other offsetting value. When you own stock and sell a call against it, it is called covered stock because the stock (a long position) is covered by the short call (a short position).

    An uncovered call is just the same as just owning a call - there is no offsetting other call like there would be in a calendar, diagonal, or vertical spread (all of which have one long option and one short one).

    I understand that this whole thing is confusing. Buying stock is like playing checkers and investing in options is like playing chess - you can study it for a lifetime as I have done and still have more to learn.
    Nov 10 04:13 PM | Likes Like |Link to Comment
  • The Ultimate Protection Hedge Against A Market Crash? [View article]
    I have not calculated the interesting number that you ask about. The graph shows that if VXX doubles like it did last summer when the European crisis hit (a crash really didn't come but fear escalated), the portfolio would have more than doubled in value. So it would have made about $4500. If you had a $45,000 and the market fell 10%, that gain would offset your loss. In this crude comparison, the options portfolio would cover 10 times as much as money as the stock portfolio. Not bad.
    Nov 10 04:06 PM | Likes Like |Link to Comment
  • A Timely Test Of The Ultimate Hedge Against A Market Crash [View article]
    I agree that bonds are due to drop but I don't think I'm smart enough to guess when it will happen so I have stayed away from trying. I will check out TBT however.
    Nov 9 11:28 AM | Likes Like |Link to Comment
  • A Timely Test Of The Ultimate Hedge Against A Market Crash [View article]
    TZA is a little too low in price to get decent options spreads off. Since the options are more important to me than the underlying, VXX works better for me.
    Nov 8 03:34 PM | Likes Like |Link to Comment
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