A 1000%(+) Gain on a Trade in Less Than Three Months? We Just Did It. Here's How.

Posted by jbrumley on June 4, 2021 3:12 PM

Do you think quadruple-digit winners are just fish tales from traders looking for a bit of an ego boost? Admittedly, such trades are few and far between. They're not impossible though. We know it, because we just made one. You can find these setups too. Not all of them will do this well. Indeed, most of them won't even come close to a 1000% gain. It only takes a couple of these monster trades every so often, however, to log some serious overall gains.

But, first things first.

The setup came in March, when our Triple 3 Options Advisory (more on that in a moment) identified AMC Entertainment (NYSE:AMC) as a bullish prospect.

Yes, this is the same AMC that had just been taken on a roller coaster ride, rallying thanks to a concerted effort to spark a short squeeze in January, which worked, but was unwound by the middle of February. The thing is, this sort of volatility surge isn't always a one-off. The echoes of this action were still ringing as of March - and as of this week, in fact - and the potential "action" was there as long as you know what to look for. The Triple 3 Options Advisory's trading algorithms know what to look for, even when it's not obvious. The key to the Triple 3's trades, in fact, is the identification of bullish trends that aren't apparent to anyone else.

With that being said, this is what we were seeing as of March 23rd, when we stepped into the AMC Entertainment (AMC) June monthly (06/18) 20 call (210618C20) at a price of $2.00, or $200 per contract; most subscribers were able to pay much less.

Surprised to see an entry on that sort of not-so-bullish day? Hold onto that thought for a moment, since we'll be circling back.

Some options traders may also be a bit surprised to see the selection of an option that's expiring nearly three months at. Just as surprising (if not more so) is that we opted for an out-of-the-money call, which are cheap, but potential problematic. Out of the money calls lose value a lot faster than in-the-money calls, and they're less responsive to changes in the underlying asset than in-the-money calls are.

There's a method to the madness, however, so to speak. These cheap out-of-the-money calls actually make the most sense from a risk/reward perspective when (1) you intend to hold the trade for a while, and (2) you've got every reason to believe there's some serious price movement brewing up. Without both of those factors, cheap three-month calls aren't exactly optimal.

We got that action. While it took a while to get going, by May 27th things were moving in our direction. That's when we sold one-third of our entire position at $6.00 - or $600 per contract - for a 200% gain. We sold the second third of the AMC June monthly (06/18) 20 calls that very same day, at around $16.50 apiece, or $1650 for a full contract. All told, this portion of the trade dished out a 900% gain.  Even if that last third of the trade was a complete wipeout and plummeted to zero, trade in its entirety would still net us a 366% gain.

We still weren't done, of course. With that sort of safety net already established, we can afford to take a big risk with the last portion.

That risk paid off. We ended up selling the last third of our AMC June monthly (06/18) 20 calls on June 4th at a price of $49.20, translating into a gain of more than 2900%. Between the three pieces of the trade, we averaged around a 1300% score here. Even if any subscriber experienced slippage and had to pay steep commissions, nobody walked away with less than a 1000% win on their AMC calls.

Yeah, but can you repeat this sort of outcome for yourself? Actually, it's not as out-of-reach as you might think, nor is it as difficult as the size of the gain might suggest. Indeed, the keys to this grand slam are actually pretty simple. The challenge is mustering the discipline and persistence to make it happen.

With that as the backdrop, here are the real takeaways from this big win:

  • The entry is a big part of the whole thing. We were willing to step into calls not while AMC was rising (as is so often the case), but while it was falling, and falling back from a major upswing in volatility. This gave us a great price. The trick here is using a trading system that's identified bigger-picture bullish momentum that's not apparent at the time of entry. (Sorry, but the Triple 3 service's trading signals are completely proprietary, though it's not as if you can't apply the same idea in creating your own algorithms.)
  • The real star of this particular trade is our willingness to split the trade up into pieces, locking in partial gains as they were reaped. Each time we did so, we were able to take risks with the remainder of the position. If the rest of the trade didn't perform so well, so what? We're still making good money.
  • We bought cheap long-term calls, but we were always willing to hold these calls for weeks, if need be. This isn't always what we do. Other BigTrends services focus on short-tern swings, and use near-term expirations that are typically in the money. The underlying philosophy here, however, was a completely different one. Make sure your option selection is the ideal one for your particular approach.
  • Finally, while this reality isn't apparent within the confines of this trade, know that this AMC trade is a statistical outlier. Most trades won't achieve quadruple-digit gains. Many won't even be triple-digit winners. Many may not be double-digit scores. But, that's ok. It only takes a couple of these trades to net you huge overall profits. Your job as a trader is simply to ensure your "other" trades don't perform so poorly that it eats away at the benefit of these rare monster winners.

If you don't have the time or inclination to find and manage these sorts of trades, don't sweat it - you're not alone. If you'd still like to achieve these sorts of gains, however, the Triple 3 Options Advisory is a great solution. New trades are signals at the end of the trading day, and alerts are sent at 6:00 PM ET. This avoids the need to constantly check your email or texts for new recommendations. Go here to learn more.