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Sometimes The Best Trade Is The One You Just Exited

Portfolio Armor's Photo
by Portfolio Armor
Thursday, Dec 04, 2025 - 0:06
Bull trader

Sometimes The Best Trade Is The One You Just Exited

This morning my subscribers and I did something that feels counterintuitive to a lot of investors:
We put on a new bullish trade in a stock I had just exited yesterday for a solid gain.

If that sounds reckless, let me explain why it’s not—and why these situations can be some of the highest-quality setups in markets driven by secular megatrends, like we’re seeing now with AI infrastructure.

Our Top Names Don’t Care About Your Feelings

One of the advantages of running a systematic process is that it doesn’t get sentimental.

Portfolio Armor’s Top Ten Names list updates daily and ranks stocks by their estimated total return over the next six months. Over the last three years, these names have averaged:

📈 20.2% forward 6-month returns
vs.
📉 10.13% for SPY over 127 rolling 6-month periods

Details here:
https://portfolioarmor.com/performance-top-names

The important part isn't perfection—it’s persistent outperformance. When a stock stays near the top of that list even after a big move… that’s a tell.

Case Study: Credo Technology (CRDO)

(aka: one of the most important companies many investors have never heard of)

CRDO wasn’t a meme stock or hype name when it landed at #1 yesterday—it's a pure-play picks-and-shovels company for the AI boom.

Here’s the elevator pitch:

  • Data centers running Nvidia GPUs need far more bandwidth at 800G and 1.6T speeds.

  • CRDO builds the connectivity chips and cables that make that possible.

  • Every AI server rack built by hyperscalers needs these components.

It’s not an exaggeration to say CRDO is one of the quietest beneficiaries of the entire AI build-out.

This is why, after jumping ~17% in after-hours trading Monday and giving some back Tuesday to finish +10%, CRDO still ranked #1 on our system—not because of the pop, but despite it.

That’s exactly the kind of signal I pay attention to.

Yesterday’s Exit… And Today’s Re-Entry

Yesterday, we exited a trade in Credo that we had entered in August: 

  • 4-leg combo on Credo Technology Group (CRDO 0.00%↑). Entered at a net debit of $2.97 on 8/15/2025; exited the put spread at a net debit of $0.20 on 9/8/2025 and exited the call spread at a net credit of $16.05 on 12/2/2025 (so, from $2.97 to $15.85). 

    Profit: 434% on premium outlay (159% on max risk).

Let me pause here to anticipate and answer a common reader question: 

Q: "If you're so good at this, why are you wasting your time writing for Zero Hedge?"

A: "I made $1,288 on that trade. I can't afford to retire yet."

Now, back to our story...

Normally, after a win like that, traders swear off a name for a while.
Systems don’t. And this morning, CRDO was still sitting at the top of the list.

So today I put on a new, asymmetric trade in it—harvesting elevated implied volatility to help finance the upside. For those who follow my daily trade alerts, the details are here:

👉

I actually prefer when a top name dips post-earnings—it makes re-entering cheaper—but even after the move this week, the risk/reward was strong enough to justify going back to the well.

Why This Pattern Works

There’s a simple but uncomfortable truth in markets:

The stocks that keep showing up as buys do so for a reason.

It’s not magic. It’s fundamentals + flows + catalysts + volatility structure aligning in a favorable way.

CRDO is a textbook example:

  • Secular tailwind (AI bandwidth bottleneck)

  • Explosive revenue growth

  • Increasing profitability

  • Institutional accumulation

  • Elevated IV that allows for efficient financing of bullish structures

When you see that combination consistently—before and after big moves—walking away just because you already won is often the wrong instinct.

Don't Be Afraid To Go Back To The Well

If you’ve ever ridden a winning trade, closed it, and then felt frustrated watching the stock keep running, you’ve felt this dynamic firsthand.

The skill is not predicting the future—it’s identifying when a name remains a top-tier opportunity even after you’ve taken profits.

Sometimes the best trade really is the one you just exited.

If you want a heads up when we place our next trade, feel free to sign up for our trading Substack below. 

 

Thursday Afternoon Update

Our next trade is off to a good start. 

 

 

Contributor posts published on Zero Hedge do not necessarily represent the views and opinions of Zero Hedge, and are not selected, edited or screened by Zero Hedge editors.
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