Dec 2019: AMZN $1895- $1865 Bear Put Spread
Stock
Trade Structure
Trade Date
Expiration Days
Trade Rationale
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
Trade Outcome
Profit/Loss
Beginning Account Balance
Ending Account Balance
Thanks for the detailed trade analysis. One question: If the profit was $569, why did the account balance only go from $16,200 to $16,400 (up $200)? Thanks!
I have multiple trades on at the same time which affect the Net Liq of my portfolio. One trade could be a winner, another could be a loser which can cancel each other out.
Can I ask why you chose the range $1895-$1865 for the spread when the stock price was at $1880?
I always buy ATM spreads. So, the stock price is always between the width of the strikes. This allows me to buy the trade for 1/2 of the width of the strikes.
eg. If XYZ is at 197, and I am bullish, I would buy XYZ 195-200 Call Spread for $2.50. The potential profit of this trade would also be $2.50 (i.e I can double my money)