by Michael Shulman 08/28/08
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!
On Jan. 3, when we cashed out of the second Ruby Tuesday put option play, we decided to "roll" with the punches one last time -- this time via the RT July 7.50 Puts. Again, we saw the stock falling to (and, ultimately, through) $7.50 a share. And although we expected it long before July, that still gave us plenty of time for the trade to work in our favor.
Our third and final position felt like a whirlwind, but with that stiff breeze came a pile of cool profits in just seven trading days. We bought the July 7.50 Puts for a mere 75 cents, which were poised to offer us a chance to double or even triple our money.
Actually, we did better than that -- on Jan. 11, as shares slid below $6, our puts spiked to $2.60 apiece, where we closed the position. After all, we were staring at our best return yet -- 246.66%!
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All told, we spent two and a half months playing Ruby Tuesday on the short side, enjoying an average gain of 174.53% and a total gain of more than 500%. And it all started with a dollar ($1.05, to be exact) investment.
So, the next time you're about to spend a dollar on something insignificant, keep in mind that you can either get a candy bar or a bottled water from a vending machine, or else it can pay you back three-, four- or even fivefold (or more!) in the options markets.
And it was almost as easy as clicking our "Ruby" slippers together and saying, "There's no place like the short side!"
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