Dec 2019: AMZN $1895- $1865 Bear Put Spread



Trade Structure

$1895-$1865 Bear Put Spread

Trade Date


Expiration Days


Trade Rationale

With the market on a tear and AMZN breaking some crazy holiday records, the stock shot up 9.5% in a day. The next day we see a Doji candle. Basically, a Doji mean that the sellers and buyer's are equal and there is indecision. Combine this with a big up or down day usually is a great indicator of a trend reversal or pullback.

Trade Selection Criteria

Overall market movement

Overall market has been on a tear for weeks. AMZN shot up 9.5% in 1 day on news that it had a great shopping season beating previous year’s records. 9.5% on a single day without an even like earnings is extreme. On the following day we see a nice DOJI candle representing indecision between buyers and sellers. A huge up/down move followed by a DOJI is usuall a great indicator for a mean reversion. Read about DOJI here

No Earnings or Significant News

Earnings are behind us and the next earnings will be after our expiration cycle. Earnings scheduled for 01/30/2020

Bollinger Bands outside Keltner Channels

Bollinger Bands are clearly outside Keltner Channels. Perfect time for a mean reversion trade 

RSI Analysis

RSI is in over-extended territory, however not showing any clear signs of trend reversal.

ADX Analysis

ADX is weak and indicates that there is no trend in place.

Trade Analysis

You will notice that immediately after putting on the trade, AMZN initially went down, then bounced back up and after that kept whipsawing in a range. I have mentioned how I deal with these kind of trades in my book. I was still able to close this for an approx. 45% profit of $596

Trade Outcome




Beginning Account Balance


Ending Account Balance


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