Ruby Tuesday: No Place Like the Short Side
by Michael Shulman 08/27/08
Speaking of "rolling," this is a tactic that we use to squeeze as many short-side profits out of a falling stock as possible. You can roll "out" to a further expiration date, and "down" to a lower strike price to give yourself some great leverage. What you do is close your original position, pocket the profits and reinvest your original money into a new position.
It's way less complicated than it sounds, and you can be rewarded handsomely for the extra effort!
Such was the case with our RT Jan 15 Puts. We sat back and watched the stock slide easily through that $15 strike price, and less than a month later, the stock traded down to $13.34. At that point, our $1.05 puts were worth $2.10, and I recommended that subscribers bank the gains in "short" order.
But my research indicated that there was much more downside for RT, which meant more upside for short-side investors. This is where rolling a position comes in very handy. Since the stock was toppling, $12.50 per share looked like a reasonable destination, and the puts at that strike price with an April expiration date were a screaming bargain at $1.30 apiece.
So, on the same day that we banked the 100% gain in the Jan 15 Puts, I recommended rolling down and out to the April 12.50 Puts.
Although the stock was "down and out," we were anything but … especially when shares dropped through our new strike price and kept on going!
On Jan. 3, a day that shares traded at a "whopping" high of $9.47, our puts traded up -- way up -- to $3.60 apiece. While everyone else was bemoaning the terrible start to the new year that the broader indices were experiencing, we banked our first gain of the year -- to the tune of a 176.92% winner. Now THAT was something to celebrate!
So, by this point, we'd enjoyed an appetizer of 100% returns, followed by a second course of 176% gains. Could we enjoy a main course of even more happy returns, with a gain that rivaled those we'd already enjoyed? Actually, the final play in this trilogy was more like the main course plus dessert with a cherry on top!
by Michael Shulman 08/27/08
Speaking of "rolling," this is a tactic that we use to squeeze as many short-side profits out of a falling stock as possible. You can roll "out" to a further expiration date, and "down" to a lower strike price to give yourself some great leverage. What you do is close your original position, pocket the profits and reinvest your original money into a new position.
It's way less complicated than it sounds, and you can be rewarded handsomely for the extra effort!
Such was the case with our RT Jan 15 Puts. We sat back and watched the stock slide easily through that $15 strike price, and less than a month later, the stock traded down to $13.34. At that point, our $1.05 puts were worth $2.10, and I recommended that subscribers bank the gains in "short" order.
Don't Miss ...
But my research indicated that there was much more downside for RT, which meant more upside for short-side investors. This is where rolling a position comes in very handy. Since the stock was toppling, $12.50 per share looked like a reasonable destination, and the puts at that strike price with an April expiration date were a screaming bargain at $1.30 apiece.
So, on the same day that we banked the 100% gain in the Jan 15 Puts, I recommended rolling down and out to the April 12.50 Puts.
Although the stock was "down and out," we were anything but … especially when shares dropped through our new strike price and kept on going!
On Jan. 3, a day that shares traded at a "whopping" high of $9.47, our puts traded up -- way up -- to $3.60 apiece. While everyone else was bemoaning the terrible start to the new year that the broader indices were experiencing, we banked our first gain of the year -- to the tune of a 176.92% winner. Now THAT was something to celebrate!
So, by this point, we'd enjoyed an appetizer of 100% returns, followed by a second course of 176% gains. Could we enjoy a main course of even more happy returns, with a gain that rivaled those we'd already enjoyed? Actually, the final play in this trilogy was more like the main course plus dessert with a cherry on top!
What are the five rules for constructing great short-side positions? Read on to find out.
Live Well, Thanks to Dying Companies
If you don't want to buy a company's products or services, you shouldn't buy its stocks.
Money Does Grow on (Dollar) Trees
You know what you can get for a buck, besides a hamburger or a candy bar? An incredible short-side position that could turn 500% in a matter of weeks.
There's money to be made from the economic slowdown. Listen to find out how we did it on the short side.
