Back on August 29th, I spotted something beautiful: a stock consolidating just below all-time highs while implied volatility was falling asleep.
This is the kind of setup that makes options traders salivate. Cheap calls on a stock poised to break out.
The stock was nVent Electric $NVT, a UK-based maker of electric connections and protection solutions. After a monster earnings reaction earlier that month, it had been coiling sideways above a shelf of former highs, looking ready for a fresh leg higher.
Sam Gatlin's analysis in the Junior Hall of Famers report sealed the deal: new highs on a relative basis approaching, which is the best confirmation we can get for new highs in absolute terms. His target was $114 over the coming 3-6 months, with a trigger above $86.50.
But what really caught my eye? The potential "Hundred-Dolla-Roll" on tap.
"I like buying $NVT February 100 calls for approximately $5.25-$5.50 per contract. The premium I pay today is the most I can lose in the trade.
If we get the hundred-dolla-roll and the stock trades to $105 per share, I'm going to take my original cost basis out. This means, I'll sell enough of my open contracts to pay me back for my original investment—the fewer the better! Then I'll hold the rest and look to take profits on the remaining position if the stock gets to Sam's price target of 114.
Meanwhile, if $NVT breaks below $85 at any time during my hold, the idea is likely dead and I'll look to salvage whatever I can."
Fast forward to late October.
NVT did exactly what we hoped it would do. It broke out. It ran. And it gave us that hundred-dolla-roll I was targeting:
On October 29th, I sold half my position for $13.50 per contract—taking out my original cost basis and then some. Two days later on October 31st, I sold the second half for $19.10 per contract.
The result? Nearly 200% return on invested capital in just 63 days.
This is what happens when you combine quality technical analysis with opportunistic options positioning. The setup was there—consolidation at highs, relative strength, bullish fundamental backdrop. And options players were asleep, offering us cheap premium to position for the move.
I bought calls when volatility was low. Structured a plan that removed my risk after the initial move. And let the position work exactly as designed.
No heroics. No getting cute. Just following the plan Sam's research laid out and managing the position according to the rules I set on day one.
This trade exemplifies why I love combining All Star Charts technical research with smart options structuring. The charts told us where the opportunity was. The options gave us leveraged exposure with defined risk. And the plan kept us disciplined through the execution.
Sixty-three days. Nearly 200% return. All from recognizing when cheap volatility meets a high-probability breakout setup.
This is the game.
Sean McLaughlin | Chief Options Strategist, All Star Charts
