How This "Loophole" Trade Delivered Twice the Money - Ahead of Schedule

FedEx Corp. (NYSE: FDX) delivers "the world on time" to its customers and slow, steady growth - along with a $0.25 dividend - to its shareholders.

In fact, in 1983, it became the first American company to pull in more than $1 billion in revenue without any mergers or acquisitions, and it's been outperforming ever since.

FedEx makes a good, if expensive, foundational holding, but its $44 billion market cap, low volatility, and 282.3 million shares make it close to the last stock you'd ever expect to double your money quickly, let alone in less than three weeks.

But thanks to the easy, inexpensive trade I'm about to show you, that's exactly what happened.

Here's how we were able to turn a modest move up in FedEx shares into a 100% gain...

In the Know
The lingo for buying and selling options is different from stocks. These will be helpful to know as you take in more profits in your trading...

Buy-to-open: Use this when you want to purchase a call or put option. The premium is debited from your account.

Sell-to-open: Use this when you're selling a call or put on stocks that you own or have borrowed on margin.

Buy-to-close: Closing a short position on a stock you have borrowed on margin.

Sell-to-close: Selling an option that you own and exiting your long position.

I Spotted This on My Money Calendar

I use my "Money Calendar" to zero in on trades that have a better than 90% chance of delivering triple-digit (or better) gains in the shortest possible time.

It's been a reliable way to take down gain after big gain, and back on Sept. 22, the Money Calendar was telling me it would be a really great idea to schedule some quality time with FedEx in late October.

And to get the most possible money out of this trade, a "loophole" was in order.

Technically, this is a bull call spread, and it's the way to go when you expect the stock to go higher but you don't want to leave yourself exposed to so much risk.

You simply buy call options at a specific strike price and then you sell the same number of call options at a different, higher strike price expiring the same month as the calls you bought.

So, on Sept. 22, I let my Money Calendar Alert members know what move we should make.

I recommended that my readers buy-to-open FDX Oct. 23, 2015, $150 calls (FDX151023C00150000).

Next, in the very same alert, I recommended they sell-to-open FDX Oct. 23, 2015, $155 calls (FDX151023C00155000).

As simple as that, we had our vertical call spread for $2.50 or less. Now, the "loophole" position was actually trading at $2.00 the morning of the entry date. So the exit on this trade would be to sell-to-close with an exit of $4.00, or a cool 100%...

The profits that came quickly afterwards were so fast, they shocked even me...

Loophole tradeYou see, I was only expecting FDX shares to mount a $6 or $7 run by Oct. 22, so the "exit strategy" I set up had my readers prepared to take profits with these instructions:

Sell-to-close FDX Oct. 23, 2015, $150 Call (FDX151023C00150000); and

Buy-to-close FDX Oct. 23, 2015, $155 Call (FDX151023C00155000) at 100% on Oct. 22, 2015.

But the markets were about to toss us a very welcome curveball. One that really drives home the power of rational decision-making and flexibility.

Stay Flexible to Take Down Big Profits When They Happen

Like I said earlier, I was expecting a modest six- to seven-point run in FedEx shares.

But earlier this week, the shares popped $10. Interestingly, it was just about spot-on the 200-day simple moving average (SMA).

That meant the profits were bigger and faster than I expected.
The report I got was at 9:43 a.m. EDT on Oct. 7, and the options for this trade looked like this:

Loophole trade tableSell-to-close at $9 the FDX Oct. 23, 2015, $145 calls (FDX151023C00145000).
Buy-to close at $5 the FDX Oct. 23, 2015, $150 calls (FDX151023C00155000).

So we had to be flexible with our exit strategy; whatever the order filled at, the order to close the trade was to be double that amount. Since the fill was at $2.00, the order to close this trade had to be placed at $4.00.

So that's what we did, and the order filled on Oct. 7 - nine trading days before the expected end date, Oct. 22.

Now, it has to be said that there was a possibility of getting just a bit more than the $4, but it's never a good idea to be greedy in these trades. It's just not worth the risk to hang in on an already wildly profitable and successful trade for a few more dollars - dollars that might never arrive.

Stick to the discipline and be ready to take down the profits you expect as soon as they appear, even if that's ahead of schedule.

Don't miss any more of Tom's Power Profit Trades. He's getting ready to reveal exactly how powerful the Money Calendar is and exactly how many 90% or better wins it's delivered over the past 10 years. Click here to get this and all of Tom's Power Profit Trades at no charge.

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About the Author

Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.

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