Aug 2019: GOOG $1165 – $1185 Call Spread
Stock
GOOG
Trade Structure
$1165 - $1185 Call Debit Spread
Trade Date
8/6/2019
Expiration Days
9/20/2019
Trade Rationale
Same time frame as the AMZN trade earlier. Earnings were over and GOOG is showing the first hint of recovery after an extended short term downtrend. Look at the chart for some signs of recovery (I explain how to read all these in my book).
At this point, I put on a $1165 - $1185 call spread with 45 days to expiration. It cost me $1040 approx to put on this trade. The goal is for GOOG to recover and stay above $1185 and I will double my money. Note, GOOG can go up $50 in a single day, and we are only asking for a $15 move in the next 45 days.
Trade Selection Criteria
Overall market movement
From 7/30 to 8/5 the overall market had been under pressure and is in oversold territory. These are the best times to look for trades.
No Earnings or Significant News
Earnings are behind us and were announced on 7/25. There is no significant news or earnings event during our trade cycle.
Bollinger Bands outside Keltner Channels
Bollinger Bands are outside Keltner Channels. We are not in a squeeze or low volatility period.
RSI Analysis
RSI is inconclusive, but still shows a change in trend.
ADX Analysis
ADX showing diversion. The previous downward momentum seems to have lost its strength.
Trade Analysis
GOOG not only recovered nicely from that point and went on to close at $1229 on expiration day. Again, the beauty of this trade is that I didn't even need that massive move to $1229. I would have doubled my money even if it closed at $1185 at expiration.
Trade Outcome
Winner
Profit/Loss
$1000
Beginning Account Balance
$
Ending Account Balance
$
