Michael Shulman

Profits in Martha Stewart

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All stayed quiet on the short front through early January, when on Jan. 3, our puts had doubled in value, from $1.60 to $3.30, giving us a nice 106.25% gain. Not bad, but the stock was at $9 and dropping quickly, so while it was prudent to preserve some profits, there were many more to be captured.

So, it was time to roll the position -- that is, to take profits in the original Jan 12.50 Puts and use the original investment dollars to buy a new position with a later expiration date and a lower strike price. And the MSO June 10 Puts, which were trading at $1.85, looked like the way to ride the short-side express to even-bigger profits.

Long story "short," the overall market mayhem that came with the dawning of the new year -- plus an abysmal lack of holiday sales for MSO and many other retailers -- made the position work in our favor very quickly.

In fact, on Jan. 16, it was time to take the money -- $4.40, to be exact, which was a 137% gain! -- and run!

Consumers might not have been spending much at their favorite retail establishments this past holiday season, but those of us who did our shopping in the options markets by buying puts on these retailers enjoyed some very merry profits indeed!