FEB 2021: LOW $160- $165 Bull Call Spread

Stock

LOW

Trade Structure

$160 - $165 Call Spread

Trade Date

2/24/2021

Price Paid

$250

Expiration Days

04/01/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

Despite beating earnings, LOW fell down from $170 all the way down to $160 which caught my attention. It did keep dropping after I put on my trade (again not trying to catch bottoms here) and many of our traders got in at 155-160 strikes too. This drop even after an earnings beat is clearly unwarranted. It should snap back very fast if we get just a couple of green days next week.

LOW_160_165_CallSpreadOpen | Mean Reversion Trading Using Options

Trade Selection Criteria

Overall market movement

N/A this is a post earnings trade. The individual stock’s price action is more important for these trades.

N/A

No Earnings or Significant News

This is a post earnings trade. Earnings were announced a few days ago.

CHECK

Bollinger Bands outside Keltner Channels

Bollinger bands are clearly outside the Keltner Channels.

CHECK

RSI Analysis

This is a post earnings trade. We take these trades based on Support/Resistance levels. This is also described in the 2nd edition of my book.

N/A

ADX Analysis

This is a post earnings trade. We take these trades based on Support/Resistance levels. This is also described in the 2nd edition of my book.

N/A

Trade Analysis

LOW initially got dragged down further all the way down to $150 giving many of our members way better entry points than my own trade. But it quickly turned around to make a dramatic recovery. March was a brutal month for Nasdaq, and all these other trades that we took in stocks like HD, REGN, LOW etc gave us a helping hand in handling the correction.