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Not every trade goes according to plan. In fact, some of them go spectacularly wrong — at least at first.
I want to walk you through one of mine: a Chipotle Mexican Grill (CMG) position I’ve been working for several months that’s finally about to turn into something really interesting.
Here’s what happened. Back in July, I sold a $49 strike put going into earnings. I thought I’d nailed the bottom. Spoiler alert: I hadn’t.
The stock gapped down on earnings and kept falling. Then another earnings report hit in early November, and it gapped down again. At that point, I was sitting on 400 shares with a cost basis hovering around $48 after factoring in the premium I collected.
So what did I do? I didn’t panic. I didn’t stop out. Instead, I sold another put during that second gap down around the $34 level and got assigned 200 more shares.
That move? It changed everything.
Averaging Down to Flip the Script
By adding those shares, I brought my cost basis from $49 down to $43 across 600 total shares. And guess what? The stock bottomed on Nov. 11.
Now it’s trading around $39 to $40, and I’m almost back to breakeven. A little spark here, and I’m back in profit territory on a trade that was underwater for months.
As the stock started recovering, I continued selling covered calls intermittently to cash flow the position. But right now, I’m letting it run. It’s on a heck of a tear, and I don’t want to limit the upside by selling options too early.
Sometimes the best strategy is to step back and let momentum do the work.
My technical work shows that once CMG breaks above the 618 Fibonacci level — right around that $49 area — it activates a target of $77 with a 75% probability.
That level is the line in the sand, and once price clears it, things can accelerate quickly.
The Math That Makes It Worth It
Let’s do the math. If my cost basis is $43 and the stock hits my $77 target, that’s $34 per share in profit. Times 600 shares. Plus all the premium I’ve collected — and will continue to collect — along the way.
This could turn into a pretty major trade, and it all started with something that didn’t go as planned.
The lesson here is NOT that you should always average down or that every losing trade can be saved. The lesson is that disciplined position management, income generation and patience can sometimes turn a failed entry into a highly profitable outcome so long as you’re patient and you have a quality stock that just got beaten down for a while, which happens.
That’s the real edge — not perfection, but adaptability.
I thought I had the bottom in July. I was wrong and I was OK with being wrong. But by continuing to work the position instead of taking a loss, I’ve positioned myself to potentially make this one of my better trades of the year.
Sometimes the best trades are the ones you have to fight for.
Jeffry Turnmire
Jeffry Turnmire Trading
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I’m just a regular dude in Knoxville, Tennessee: a husband, father, civil engineer, urban farmer, maker and trader.
I’ve been at this trading thing with real money for 20-plus years, and started paper trading over 35 years ago. I have a knack for making some epic predictions that just may very well come true. Why share them? Because I like helping other people — it’s the Eagle Scout in me.
*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. 100% Win Rate Shadowing Dark Pool Exchanges
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Including the ones they’ve got spread across Dark Pool Exchanges.
I’ve closed 16 trades so far without a single loss and I’m looking to go after what could be No. 17 this week!
