APR 2021: LMT $370-$375 Bull Call Spread

Stock

LMT

Trade Structure

$370- $375 Call Spread

Trade Date

4/26/2021

Price Paid

$250

Expiration Days

05/28/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

Sometimes, I know well in advance what levels I am looking at before taking a trade. In all those cases, I post the levels as announcements in our group ahead of time. LMT was one of those cases. After an earnings beat, LMT sold off due to profit taking and I entered this trade based on 370 as the level of support.

discord | Mean Reversion Trading Using Options

LMT_370_375_CallSpreadOpen | Mean Reversion Trading Using Options

Trade Selection Criteria

Overall market movement

N/A – There is nothing drastic going on in the overall Market. ABNB has dropped on no material news

N/A

No Earnings or Significant News

This is a post earnings trade and earnings are behind us

CHECK

Bollinger Bands outside Keltner Channels

This is a post-earnings trade. We use support/resistance for these as other indicators are mostly irrelevant for these kind of trades

N/A

RSI Analysis

This is a post-earnings trade. We use support/resistance for these as other indicators are mostly irrelevant for these kind of trades

CHECK

ADX Analysis

Although, I use support/resistance for 90% of my post-earnings trades, in this case DI- is flattening out indicating a loss of downward pressure.

CHECK

Trade Analysis

As with most mean reversion trades, this trade went against me slightly for a couple of days before reverting back and heading in my direction. Although, LMT is trading at $387 today, but I only needed it to be above $375 and I would have made my full profit.