Hey trader,
On Tuesday, I bought a call vertical in XLP, the consumer staples ETF, for 60 cents.
Two days later, it only had 4 cents of risk left.
I could’ve closed the spread for over a 50% gain.
Instead, I rolled my call vertical. Essentially, I sold off the bottom half of the spread and kept the top half.
That roll paid me back 56 of my 60 cents. If XLP reaches $84, the half I kept can still deliver a 93% gain.
Rolling a call vertical like this lets you skip the choice between grabbing a quick profit and holding out for the full target.
You take nearly all your risk off and keep the upside working.
But it’s not something you always want to do. There is a time and place for it, and I want to teach you what that is.
It started with the money I saw rotating into staples on Tuesday.
Why I Bought a Call Vertical in Staples
On Tuesday, the option flows showed a very significant rotation into consumer staples. Walmart was the number one trade in that move.
Staples are interest rate sensitive, since investors mostly hold them for their dividends.
When TLT, the long-term Treasury ETF, goes up, yields are going down. That’s good for staples.
I shared a 109/111 call vertical in Walmart that was going for 58 cents. By the time I got to it with my trading room, it was pricing at about 68 cents.
Walmart had already run a little. I went with XLP instead and bought the 82/84 call vertical for 60 cents.
How Rolling My Call Vertical Took My Risk Off
Rolling was my plan from the start. Once XLP moved, I’d sell the 82/83 call vertical and keep the 83/84.
By today, the 82 call was deep in the money, meaning XLP was trading well above that strike. It carried about a 70 delta.
Delta basically measures how much an option moves with the stock. A 70 delta left a lot of value sitting in the bottom half of my spread.
Earlier today, the 82/83 was available for 56 cents. I took it.
I’d paid 60 cents for the whole spread. Collecting 56 cents back left me with only 4 cents of risk.
Here’s where the trade stands now:
- Setup: I bought the XLP 82/84 call vertical on Tuesday and sold the 82/83 today. That leaves me holding the 83/84.
- Cost: 60 cents to open, minus the 56 cents I collected on the roll. That’s 4 cents of risk.
- Target: I want to sell the 83/84 for 60 cents, which needs XLP at $84. That brings my total credit to $1.16.
- Edge: That’s 56 cents of gain on 60 cents of risk, a potential 93% profit.
- Adjustment: If XLP dips to around $81.50, I can roll the 83/84 back down to an 82/84. If it climbs back to $83, I can do the same roll again.
I rolled it to take risk out in case XLP reversed today. With eight days to expiration, I don’t have to do anything else right now.
Another Way to Roll a Call Vertical
Walmart gave me a second version of the same idea. The 109/111 spread went from 58 cents to about $1.15 to $1.20, roughly a 100% gain.
My target there was $1.20 or more. Walmart was also pushing through $110, the level I’d expected it to reach.
Here, you could close the 109/111 and buy the 111/113 call vertical for about 33 cents. That locks in some gains and still leaves you upside to $113.
Closing it and moving on to the next thing is fine too.
When There’s Nothing Left to Roll
XLU didn’t give me the same chance. I’m in the 41/43 call vertical at 48 cents, and the 41 strike is just barely out of the money.
The 41 call was in the money earlier. Now that it’s out of the money, there’s no room to roll.
I’m not worried with eight days left. If XLU pulls back to about $39.50, I can roll down to the 40/42.
JetBlue showed me the same limit. I bought the $5 call for 12 cents, and the bid now sits at about 2 cents.
Selling it for 2 cents isn’t really worth it. My plan is to buy the $4 call in the October 23 expiration and increase my basis instead.
Before you take a quick profit on a call vertical, check how much value sits in your lower strike. If it’s deep in the money, selling that half can pay back most of your cost while the top half keeps working.
The option flows into staples pointed me to XLP on Tuesday. Today’s roll came straight from the plan I had when I opened it.
I do that work with members every session. The 90-Day Block Hunter Challenge is where I hand you the same tools I used today.
Here’s what you get when you join:
- The Block Hunter Console, scanning hundreds of names for hidden pressure.
- 2 to 3 block alerts a week, plus one high-upside setup every Friday.
- The live Masterclass and 12 weeks of mastermind sessions with me.
- Ghost Hour from 11:30 to 12:30 EST every weekday. That’s the window when the market moves fastest and the prints tend to show themselves.
Recent Block Hunter reads include SILJ +392%, PLUG +222%, NKE +142% and GDX +72.5%.
The next trade worth rolling might already be sitting on the Console. Your next 90 days start today, and your seat is protected by a full 30-day money-back window.
▶ Join the 90-Day Block Hunter Challenge
Brandon Chapman, CMT
Creator of Ghost Prints
