Earlier this month, I walked you through a stock that had caught my eye— EAT (Brinker International) —and showed you a few different ways to trade it.
First, we broke down why it was a trending stock worth watching and I gave you a couple of trade ideas.
Then, about 10 days later, I followed up on two of the trade setups we talked about — the covered call and the bull put spread — both were short-term trades that worked out just as expected.
But one trade was still pending: our naked put on EAT.
So today, I want to close the loop on that trade and show you how it all panned out.
Earnings Sent EAT to the Moon
Since we last talked about EAT, it’s rallied massively on earnings, jumping 17% overnight just after earnings were announced a few days ago.
With that kind of move, this trade worked out even better than expected.
We originally sold the $135 put expiring February 21 for $7.00. And with the stock now trading way higher — about $183 and change at the moment — that same put option is now worth… a whole 5 cents!
Could You Just Close It Out?
Let’s be real — there’s virtually zero chance EAT is coming back down to $135 before February 21.
I rarely, if ever, close out trades early. I like to let them expire worthless and keep the full premium.
But honestly? It’s hard to justify hanging on for three more weeks just to squeeze another nickel out of it.
So if you were in this trade and wanted to free up capital for something else, you could close it out right now for 5 cents and move on.
What’s Next for EAT?
Now, just because you might be closing out your EAT put doesn’t mean you should go jump into another trade with EAT…
Before you go chasing that strong momentum, I want to throw out a word of caution.
Take a look at this chart:
When EAT popped on earnings, it shot far, far above its 20-day trendline.
Could it keep running? Sure, anything is possible in the market…
But we’re not in the business of gambling. Always remember: We play the odds.
And the odds say that when a stock gets this far ahead of itself, it’s likely to pull back or at least chop sideways for a while.
So while EAT is still in a bullish trend, I’d probably move on to something else that’s trending — but isn’t overextended.
Now’s a good time to start scanning for the next high-flying stock.
If you need a refresher on how I find these plays, here’s my step-by-step tutorial on spotting trending stocks.
Final Thoughts
This was a perfect example of why I love trading high-probability setups.
We stacked the odds in our favor, got paid $7 per share (since each options contract controls 100 shares, that’s $700 we collected per options contract!) for a put that is now worth practically nothing, and rode the trend without taking on unnecessary risk.
Whether you took one of the short term trades we talked about early in January, or took this longer term one, these trades on EAT were winners.
Now it’s time to move on to the next opportunity.
Trade well,
Jack Carter
P.S. Have you seen this groundbreaking Two Way Options strategy? Check it out here.
