What is harder than finding an option that doubles? Watching it triple—or more—and then deciding how much of that gain you are willing to give back. That is where a trading system earns its keep. Buying is the easy part. We see the setup, wait for the breakout and buy the option. Selling is harder, because no bell rings at the top and nobody consistently sells at the exact high. A few select trades from this week’s trade table offers a pretty good illustration of what I am getting at. The Big Numbers—and What They Really Mean Our GDX October $100 call, bought August 5, reached a best gain of approximately 429%. The GLD September $400 call reached approximately 568%. SIL’s October $95 call reached approximately 136%. All of these are well off their highs and hanging around their 50% trailing stops. Those are best returns—not a claim that every subscriber sold at the high. Nobody does that consistently, including me. But the numbers show exactly why we trade options. When the trend is right, a relatively modest move in the underlying stock or ETF can produce an exceptional return on the option. One big winner does not make the next trade in the same sector a winner. Gold does not owe us another 500% gain. Oil does not care how well the last oil trade worked. The next trade doesn’t owe us anything. It has to qualify on its own. No Bell Rings at the Top Once an option has shown a large gain, its best price becomes the number we remember. An option runs from $2 to $10, then slips back to $7. We are still up 250%, yet it somehow feels as though we lost $3. That is when traders start telling themselves: “I’ll sell when it gets back to $10.” Why $10? Because it traded there once? Because we wish we had sold it there? Neither answer tells us what the underlying stock will do next. This is why I use rules. They make the decision before emotion, regret and hindsight take over. Our rules are simple: A 50% loss is a hard stop: the trade is gone. Once an option gains 100%, we use a 50% trailing stop to sell some or all of the position. Subscribers have some latitude here. Sell it all, sell most of it, or keep 10% to 20% “just in case.” That small remainder matters because, in my experience, about 30% of these trades eventually come back. Most do not. That is why the position left behind should be small enough that we have already protected the bulk of the gain. The purpose is not to produce a perfect exit. The purpose is to keep one great trade from turning into a mediocre one—or worse. A Good Story Still Needs a Good Entry Longtime subscribers know the drill: fundamentals tell us what we may want to own; the chart tells us when to own it. That is Confirmatory Analysis. And it applies to re-entry just as much as it applies to the original trade. A sector can remain attractive after a particular option trade ends. We can exit, reassess and come back when a new setup develops. We do not have to stay continuously invested to prove that the original idea was right. Just as important, a lower option price does not automatically make it a bargain. For an option buyer, time matters as much as direction. The stock can eventually recover while our call or put simply runs out of time. “Cheaper than Tuesday” is not a buy signal. What I Want to See Next As I run the charts for the next round of trades, I am primarily looking for three things: A pullback that holds support. A strong move followed by an orderly retreat can produce another entry—but first I want to see buyers defend the trendline. A fresh breakout after consolidation. Let the stock settle down, establish a clear line of resistance, then break it. That gives us a signal and a level that tells us when we are wrong. A breakdown that cannot recover. We trade both sides. If support breaks and the rebound cannot reclaim it, puts deserve the same consideration as calls. All three questions are answered by the chart, not by the price of the option. Only after the chart confirms do we move to the option table: enough time, a sensible strike, acceptable liquidity and the most capital-efficient way to trade the move. Until then, there is no reason to force a trade. We Don’t Have to Win It Back in the Same Stock After a loss—or after giving back part of a gain—the temptation is to demand a rematch. The market does not care where we lost the money, and it offers no bonus for making it back in the same ticker. Our job is simply to find the next confirmed setup and manage it on its own terms. I want more big winners. Of course I do. But I also want us to recognize when one trade is over, when the next one is developing and when the right trade is no trade at all. On My Radar: SPCX and the $150 Test One stock worth putting on your screen is SPCX. Because the IPO was only in mid-June, we do not yet have much price history from which to draw our trendlines. The fundamental story, however, needs little introduction. We made a lot of money in TSLA during its run from December 2019 into early 2022—from the split-adjusted mid-teens to more than $400. Now it may be SpaceX’s turn. We are much earlier in SPCX’s trading history, although SpaceX is much further along as a business than Tesla was at the beginning of that run. Here is the setup: SPCX is approaching the $150 resistance zone, with another share unlock scheduled for September 9. That gives us a very clear test: can buyers push through $150 while the market is anticipating more shares becoming eligible for sale? An unlock is not an automatic sell signal. Eligible to sell does not mean sold. But the potential increase in supply cannot be ignored. As always, I care less about predicting the reaction than watching what price actually does. A decisive break above $150—and the ability to hold it—would strengthen the bullish case. A quick move above resistance followed by a reversal would be a failed breakout. And even a legitimate breakout before September 9 would still have to pass the unlock test. For now, SPCX belongs on the watchlist, not in the portfolio. If the chart confirms, we will then look at expiration, strike, liquidity and cost. There is no reason to choose the option before the stock gives us the signal. The next trade doesn’t owe us anything. We owe it the same discipline that got us into the good ones. Active Options* *TRADE MANAGEMENT: A -50% hard stop exits the trade in its entirety. Once an option gains +100%, use a 50% trailing stop to exit some or all of the position. At your discretion, retain as much as 10% to 20% “just in case” the trade comes back. PRO Service Premium Service
