Terry's Tips - A Cautionary Tale

I came across this guy several years ago while looking at different option strategies, and he has been mentioned several times on ET. He, at first, had the persona of a kindly old gent who made all the money he needed as an options trader and, as a Harvard B School grad, was a self-styled options "expert". He said he was giving most of his money to charity that he made through Terry's Tips.

I took a look at his strategies, stuff like doing call diags (selling near term against a longer term) and later 'flys or condors and put-protected spreads. He got pounded on a few big moves in QQQ and later tried to time trades with MAs. Bad move. He also setup a deal where he could trade other people's accounts for them through OptionsXpress. Another bad move. Amazingly, he ended up trading something like $14 million in accounts.

I had plenty of experience trading his exact same strategies thru the 1999-2002 Nazdak meat grinder. So I knew it could get tough going and plenty risky, and it always seemed to me like he over-leveraged and gave the risks very short shrift.

So I never used any of his stuff, but I did follow his trades. He absolutely hammered his followers with gigantic account-closing losses.

His SEC troubles have been posted on ET, but here is the complaint and link:

http://www.sec.gov/litigation/complaints/comp19291.pdf

Not passing judgement here. Just a word to the wise: You are your own Guru. Learn to trade on your own, or buy an index fund.

 

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF VERMONT
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,
v.
TERRY’S TIPS, INC., a Vermont corporation, TERRY F. ALLEN, an individual,
Defendants.
Civil No. 2:05-cv-188
COMPLAINT
Plaintiff Securities and Exchange Commission (“Commission”) for its complaint against Terry’s Tips, Inc. (“Terry’s Tips”) and Terry F. Allen (“Allen”) (collectively, Defendants), alleges as follows:
INTRODUCTION
1. Defendants deceived investors, through false promises of unrealistic and unreasonable investment returns, into paying for Terry’s Tips autotrading program whereby the investors gave Defendants discretionary authority to trade options in the investors’ brokerage accounts.
2. Terry’s Tips is a Vermont corporation based in Vergennes, Vermont. Terry’s Tips was founded by Allen on or about May 6, 2003.
3. Allen resides in Ferrisburg, Vermont. He is the founder, owner and control person of Terry’s Tips and is a self-proclaimed stock options picking guru.
4. Beginning in 2001, Allen marketed his options trading strategies and investment newsletters through a website at www.terrystips.com.
5. In 2003, Terry’s Tips introduced a new product to its subscribers called autotrading. The autotrading program allowed subscribers to designate Terry’s Tips to automatically direct trades in the subscriber’s personal brokerage account.
6. Terry’s Tips and Allen used false and misleading performance projections to encourage subscribers to enroll in the autotrading program. Rather than achieving the high rates of return Allen advertised on the Terry’s Tips website, Allen’s trading strategies actually lost money.
7. Through the use of false and misleading performance projections, defendants convinced hundreds of clients to enroll in Terry’s Tips autotrading program.
8. Clients who subscribed to Terry’s Tips autotrading service did not achieve the advertised returns. Instead, the clients lost substantial amounts of money.
STATUTES AND RULES ALLEGED TO HAVE BEEN VIOLATED
9. Defendants have engaged and, unless enjoined, will continue to engage, directly or indirectly, in transactions, acts, practices, and courses of business which constitute violations of Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
10. Defendants have engaged and, unless enjoined, will continue to engage, directly or indirectly, in transactions, acts, practices, and courses of business which constitute violations of Sections 206(1) and (2) of the Investment Advisers Act of 1940 (“Advisers Act”) [15 U.S.C. §§ 80b-6(1) and (2)].
2
11. Defendants’ conduct occurred in connection with the purchase and sale of securities and related to clients and potential clients of Terry’s Tips.

 

I was following Terry's trades when he had the disasters a couple of years ago. I lost a lot of money. (So did he.) Mostly on Iron Condors (where you make money if a stock closes within a tight range at expiration and lose money if it doesn't). Some unhappy investors got him in trouble with the SEC and his Autotrading was suspended at OptionsXpress.

Terry learned several lessons from that. He has changed his strategy to more than just 4 positions so that there is profitability over a wider range of stock prices. He makes adjustments as necessary so that the portfolios make money on most days. His portfolios can be autotraded at 'thinkorswim' which is a much better brokerage than OptionsXpress in many ways.

The SEC investigation was rather bogus. Autotrading is a way for an investor to follow an advisory letter's recommendations. Terry doesn't control how much each investor has in each portfolio. There are dozens of different advisory services being autotraded on TOS and OX every day.

Terry had a great year in 2006 and I resumed trading with his signals in February as a test, going to a substantial sum in May. The results have been great. Something like 30% in 6 months, which includes commissions and the three 'disasters' -- China meltdown, subprime meltdown, and the Fed's 'irrational exuberance' rate cut (a large move up is about as bad as a large move down for his strategies). He also has found that this strategy works best on index stocks (but not QQQQ). We made a ton of money in Apple, and then gave a lot of it back this summer, and now back to regular gains.

I do more management than just 'invest and watch' which has added to my profitability (in and out of portfolios more often than most of his followers, and I add trades here and there when I see the need).

It's not for the beginner (or even intermediate) options trader or faint of heart, but it can be powerfully profitable.

 

freedml,

It's great to hear your opinion & experiences about "Terry's Tips" tips. I'm about to subscribe to his recommendations then try to mirror his different porfolios in my IRA account.

Since there is still some skeptical feelings about his promised successes, I probably will manage these trades by myself rather than blindly let him execute through "autotrade". Did you experience big jump between his recommended prices and the quotes at the time when you want to implement these trades ?

Thanks for sharing.

 

Oh, this is too good.

Here it comes...

 

LOL...TROLL alert....

 

Autotrading is a tool like any other. I find it valuable. Without it, you may not get the trade alerts in a timely manner. This is especially important on expiration day. Also, you'll notice that TOS often does better than his signals indicate -- with a time delay that will vary.

As I mentioned, I am in and out of his portfolios (for instance, out right now) and I add positions where I see a need. I use his autotrading but sometimes disconnect them when I want to lighten or gradually liquidate a portfolio.

Because of the nature of the system, a large move (up or down, or several days of smaller moves) can incur a big loss. I rode it down once and am much faster to 'pull the plug' now.

 

I have been AutoTrading with Terry for a long amount of time..

I made a lot of money and I lost a lot of money. Overall, I am slightly down, and I have not achieved breakeven yet.

Here is the thing: Terry really downplays the risks of his portfolios. He will brag about portfolios, Yes he is right. You can make money when the stock goes up, goes down or stays flat. This is true. But when the stock moves up too fast or moves down too fast you loose a LOT of money even FASTER.

I invested in several of his portfolios, for a good amount of time. I lost A LOT of money because I had the "good" fortune to select his loosing portfolios.

Terry does not lie or misrepresent the facts about the returns of his portfolios. Every single claim he makes about spectacular gains is true. But remember.... He has a Ph.D. in marketing. He will talk forever about how he was able to make money even with big market drops, but he will be silent about his losses.

I Autotraded his Goldman Sachs portfolio. I got in at the top and rode it all the way down. He eventually liquidated the portfolio because we had lost so much. OUCH!!! Lost a lot of money there.

Same thing for Apple, I got in at the top and I left at the bottom. The Apple portfolio has rebounded. I would be breaking even if I had stayed thru. You can argue that I should not have left Apple. But you have to agree with me I was scared after what happened to Goldman Sachs.

His Google portfolio was closed flat, but it was up more than 100% several times. In other words, if you got in at the wrong time, you would have lost 50% of your money.

Remember options are leveraged investments. Your investment can be completely wiped out in hours if we have another 1987 Black Friday.

I am still a subscriber. I think that the value is incredible. For $100/month you get what other services charge $4,000 dollars. Incredible value. But it is risky and it can be incredibly rewarding, but watch out.

I do not recommend anyone who mirror the portfolios on their own. If you are not in front of a computer the whole day every day it is really difficult. If you are going to mirror a portfolio use Autotrade.

Also the broker does not charge anything for the Autotrade, as long as you pay your terrystips subscription, the only thing you have to pay are trading commissions.

Bottom line: I am a happy subscriber. I would like to come back next month and say that I am past breakeven....

 

LOL

The magic less than 10 posts combined marketing team has arrived.

 

You are also an idiot. Beside being a shill, you can find at least a dozen BETTER systems on C2 for the same price and actually make money...

P.S.: Why the fuck are you a happy subscriber when paying for losing money??