Michael Shulman

Money Does Grow on (Dollar) Trees

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To get even more profits from this falling stock, we "rolled" into a new position, the Feb 30 Puts, which we bought for $1.10 on the same day that we closed the Feb 35 Puts.

In options trading, "rolling" means replacing an existing options position with a new one that has a different strike price and/or expiration date.

Because the stock traded down to $36 and looked like it was going to keep on falling, we went with the puts at the $30 strike because the stock looked like it could break through that level during the life of our option trade.

Well, we rolled right into another pile of profits -- this time closing out the Feb 30 Puts on Nov. 12 for 190% returns as the stock dropped to $28.50.

The stock kept going down, but I was happy to bank the profits and head on to "greener" pastures. But you may be asking yourself, "But, Shulman, why didn't you wait until later to cash out for even more profit?"

It's easy to want to make more, more, more profits when you're on a "roll." But it's important to be careful not to get too greedy.

We had some nice profits and the time had come to bank them and use them for something nice to reward ourselves for making such a smart investment.

In fact, since we closed the trade for good, the stock actually traded up a few points, which could have erased a significant chunk of our gains. And we're in this game to make (and keep) money, not give it back!

In a volatile market where many stock investors are happy to have broken even, I wasn't going to gamble with hard-earned profits. I'm also not going to scoff at 138% and 190% gains, respectively, in less than a month's time.

Ultimately, we learned an important and very profitable lesson: It seems that money DOES grow on trees -- Dollar Trees!