Revealed: A Real 100% ROI Trade [Walk-Through]

This post was originally published on this site

Yesterday, we closed out a trade in Options360 for a 105% ROI.  We held the trade for about 3 weeks, which is longer than our normal holding period – especially with my new tighter time horizon.

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I thought it would be valuable for me to walk you through the trade and explain what we did.  

We opened the trade on March 1st.  This is the exact alert that Options360 subscribers got:

PulteGroup (PHM) is one of the leading builders of both single-family and multi-family homes.  Its price point tends to be on the upper end; last quarter saw 20,439 units, a 53% in demand, with an average selling price of $440,000 which was a record. 

PHM came into 2021 with a backlog of 15,801 units, a 50% increase.  And despite souring lumber prices margins moved to 25.2% from 23.7% YoY.

Driving strong numbers are historically low rates and the Covid induced catalyst for people, especially urban families looking for new housing solutions. 

The chart has been essentially sideways for the past few months, straddling the fulcrum around to the $45-$46 level.  Twice it recently broke below 50-day moving average but in both cases quickly reclaimed that level.   After a bit of consolidation, the next move looks like a renewed trend higher. 

ACTION:

-Buy to open 2 contracts PHM April (4/15) 45 Call

-Sell to open 2 contracts PHM March (3/12) 47.5 Call

For a Net Debit Of $2.50 (+/-0.10)

Hopefully, that’s pretty self-explanatory…

On March 17, it became clear that it was time to take some profits by closing half the trade and roll the remaining position to maximize the profits.  I sent this alert:

PHM long 2 contracts April (4/15) 45 Call short 2 contracts PHM March (3/19) 48 Call for a $2.30 cost basis.  

ACTION# Close 1

-Sell to close 1 contract PHM April (4/15) 45 Call

-Buy to close 1 contract PHM March (3/19) 48 Call

For a Net Credit of $3.50  (+/0.15)

ACTION#2 Roll

-Buy to close 1 contract PHM March (3/19) 48 Call

-Sell to open 1 contract PHM March (3/26) 48.5 Call

For a Net Credit $0.25 (+/0.05)

Then yesterday it became clear that it was time to exit the rest of the trade. 

We could have held on for a bit longer or maybe rolled the trade again…

However, we don’t necessarily want to eek every penny out of a trade.  Sometimes the risk/reward profile moves to a point where it doesn’t make sense to stay in even if there is a tiny bit of profit left on the table.  

So I sent this trade alert and we closed the trade for a 105% ROI in the 3 week holding period:

Options360 – Trade Alert – PHM Close

PHM current position is long 1 contracts April (4/15) 45 Call short 1 contracts PHM March (3/26) 48.5 Call.

We had closed half the position last week, let’s close the balance for solid, almost no pain, a gain of 105% during the three-week holding period. 

-Sell to close 1 contract PHM April (4/15) 45 Call

-Buy to close 1 contract PHM March (3/19) 48.5 Call

For a Net Credit of $3.65  (+/0.1-)

No matter how you paint it, 105% in 3 weeks is a win even if we held the trade a little long.  

It’s this kind of trade selection and position management that has Options360 up 21.1% year to date, and we aren’t even out of the first quarter yet. 

Even more exciting is, I expect to see even more volatile price action in the coming months…

That means even more opportunity for us.  

I don’t have a crystal ball, but I do have 40 years working in and around the markets…

So maybe my guess is a bit better than most.  We shall see. 

In the meantime, if you want to get in on the next great trade, make sure to grab your trial subscription for just $19.  

To Your Success,


Steve