How to Pocket 500% Returns in 3 Months

by Andrew Zatlin

I just earned a 500% return on a single stock — in three months.

Today, I’ll show you how I did it.

Then I’ll show you how you could do it, too.

For a transcript of this video, see below. This transcript has been lightly edited for length and clarity.

How to Pocket 500% Returns in 3 Months

I just earned a 500% return on a single stock.

And I did it in just three months.

Curious how I did it?

Wondering if you could do it, too?

Read on…

You’ve Got Options

When I see a market opportunity, I’m the kind of investor who likes to put some money into it, and then give it some time to play out.

One of my favorite ways to play this strategy is to trade options.

Today, I’ll show you a specific trade I made so you can see how it works…

And I’ll also give you a few general guidelines — so if you try this strategy yourself, you can aim to minimize your risk and maximize your profits.

An Opportunity in the Steel Sector

As an investor, you always need to have an investment thesis — a belief that a trend or event is going to happen.

A few months ago, in January, I found just such an opportunity. I felt strongly about an opportunity in the steel industry. There were several reasons why:

  1. 17 million cars were expected to be produced in 2022.
  2. Chinese tariffs on steel were going to keep prices reasonable.
  3. And a stock market sell-off early in the year meant I could invest at a discount.

Furthermore, I had my “secret sauce” — my hiring data.

This led me to America’s largest steel producer Nucor (NYSE: NUE). As you can see below, Nucor’s hiring started to climb last year. And toward the end of 2021, the growth really took off:

I liked what I saw with respect to Nucor’s potential.

So here’s what I did…

Less Money Down… Plus More Upside

Since I believed Nucor was undervalued, I could simply have bought its stock.

But its stock was trading at $93. So buying a decent-sized position would have been expensive.

Keep in mind, if you want to invest in Tesla (whose shares trade for about $1,000), or Google (whose shares trade for about $2,500), this would be even more expensive.

So instead of buying Nucor stock outright, I bought an option on Nucor stock. Specifically, since I thought its stock price would go up, I bought what’s called a call option.

A call option gives you the right (but not the obligation!) to purchase a certain stock, at a certain “strike” price, up until a certain expiration date.

For stocks that trade a lot, there will generally be many different call options to choose from, with various strike prices and expiration dates.

I believed Nucor’s stock would rise to at least $113 by January 2023.

So I decided to buy $100 call options that expired in January 2023.

(To be clear, those options gave me the right to buy the stock for $100 a share until January 2023 — regardless if the stock was actually trading for 10 cents a share, or for $1 million a share.)

The cost of the option was $13. So to break even, the stock had to rise to at least $113. (In other words, $100 for a share of stock + $13 for option = $113.)

Here’s what actually happened…

A 500% Return

Three months later, Nucor’s stock price is sitting at almost $170.

And the value of my options has gone from $13 to $70.

So I’m sitting on a return of more than 500%...

And if the stock continues to rise, my options will get even more valuable.

Rules of Thumb

Keep in mind, options are a high risk/high reward way to invest.

If Nucor's stock didn’t go up to least $113 by January 2023, my options would expire worthless. I’d lose 100% of what I invested.

If, on the other hand, I’d simply bought the stock, I could continue to hold it until its value was realized. And I wouldn’t lose 100% of what I invested unless it literally went to zero.

Given this risk, I always follow a few key rules of thumb:

  1. Invest in long-dated options. Give yourself at least a year. Sure, this may reduce your potential returns a bit. But a slightly lower return is better than no return at all.
  2. Watch the clock. Given that options expire, keep an eye on the company’s stock price. Did it quickly pop 20%? That might lead you to a good return on the options. Did the price fall 10%? Either way, think about hitting the “eject” button.
  3. Invest in options across multiple sectors. You might get a home run like I had with Nucor. But it’s more likely you’ll hit some singles, doubles, and even some strikeouts. On strikeouts, you lose 100%. But on a home run, your upside is unlimited.

For “Pro” subscribers, check out the content below…

I’m sharing many more details about this strategy that can help you become a Pro yourself!

In the meantime, Zatlin out. Talk to you soon.

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In it to win it,
Andrew Zatlin
Andrew Zatlin
Moneyball Economics