Feb 2020: BKNG $1845- $1885 Bull Call Spread

Stock

BKNG

Trade Structure

$1845-$1885 Bull Call Spread

Trade Date

02/03/2020

Expiration Days

02/21/2020

Trade Rationale

Feb 2020: BKNG $1845- $1885 Bull Call Spread. This trade goes in conjunction with a $1875 - $1895 Bull Call Spread and $1900 - $1915 Bull Call Spreads which I bought just a few days ago. DOW crashed 700 points due to the coronavirus scare after that. Since my rationale is the same, I am basically building my position here.

BKNG_1845_1885_Bull_Call_Spread_Open | Mean Reversion Trading Using Options

Trade Selection Criteria

Overall market movement

After making new highs, week after week, Dow Jones dropped up to 500 points yesterday at one point in the day. The market had its worst day since Oct 2019.

CHECK

No Earnings or Significant News

Earnings are behind us and the next earnings will be after our expiration cycle. Earnings scheduled for 02/26/2020

CHECK

Bollinger Bands outside Keltner Channels

Bollinger Bands are way outside Keltner Channels. As you can see in the chart, BKNG dropped like a rock in the past few days with no real reason. Since, I am aware of the stocks “personality”, this is highly unusual. Perfect time for a mean reversion trade

CHECK

RSI Analysis

RSI is below 30 indicating oversold conditions. But not showing clear signs of a reversal.

Indeterminate

ADX Analysis

ADX below 40. So not too strong and not weak. Again, we are not getting any clear signals here as well.

Indeterminate

Trade Analysis

Needless to say all trades in this round yielded excellent results, including BKNG made us $1900.

BKNG_1845_1885_Bull_Call_Spread_Close | Mean Reversion Trading Using Options

Trade Outcome

WINNER

Profit/Loss

$1900

Beginning Account Balance

$18,300

Ending Account Balance

$26,995

Grow 00 into ,000 in a year or less (1) | Mean Reversion Trading Using Options

Copy of Untitled | Mean Reversion Trading Using Options

To follow along the strategies we use in the $25K challenge, we recommend that you get the strategy book which explains the whys and wherefores of our method. Get it here=> https://amzn.to/2MUOCE5

6 Comments

G S on February 12, 2020 at 11:41 am

This is perfect add-on to the early entry you did a bit prematurely in Jan

Nishant on February 12, 2020 at 11:53 am
Thanks. The nice thing about debit spreads is you need a small movement in the underlying to make it a winner. So, even though I was premature in the $1900 – $1915 trade, it is still coming out as a winner. If I had bought a $1900 call, it would have lost 90% of its value due to Theta or Time Decay eating into it.
Reply

LaDon Bruster on February 26, 2020 at 2:29 am

New to the community..looking forward to following your trades..when will you post the next challenge and will they be posted here on the website or on Facebook

Nishant on February 26, 2020 at 8:09 am
The announcement for the next challenge will be emailed to you and posted on the facebook group as well
Reply

Derek R on March 23, 2020 at 2:46 am

The expiration date listed for this trade was 21-Feb-20 but the trade closeout details have yet to be posted here. Could you pls update the same?

Daniel Andrade on May 11, 2020 at 10:59 am
The stock closed above $1900 on 2/21. So if held to expiration, this would have been a winner.
Reply