About two months ago, we closed half of our March $70 calls in Toro (NYSE: TTC) for a 100% gain.
Now the rest of our position is up 178%. However, I don’t want to exit this trade just yet because we have an abundance of time remaining — out to March — to allow this winter trade to continue playing out.
Toro was one of our first winter trades of the season. The company is a leading maker of snowblowers and lawn-maintenance equipment, and for the past decade, investors have pushed Toro’s share price higher ahead of its two prime operating seasons: winter and spring. Already, we’re seeing that rally, and I think it still has room to climb.
With our March calls, we have plenty of time for our position to hand us substantially larger gains. So, instead of closing this trade, I want us to set a stop-loss at 125%. That will give us a good amount of leeway in a volatile market, and it’ll ensure that we keep another nice, triple-digit gain in the event of a sell-off.
More importantly, it will allow us to continue riding Toro for potentially larger gains over the coming months, while at the same time preserving a large gain in the event of a sell-off. Basically, we’re going to let the trend be our friend, yet protect the downside just in case.
So here’s what I want you to do:
Action to take: Set a Good ‘Til Canceled stop-loss order on the TTC March 2016 $70 call option (TTC160318C00070000) at $6.20, or the price that secures you a 125% gain. At last glance, it was trading at $8.25.
As the option continues climbing, I’ll adjust the stop-loss higher to make sure we keep the bulk of our gains going forward. So keep an eye out for my alerts.
Until next time, good trading…
Editor, Precision Profits