FEB 2021: SPOT $310 – $320 Bull Call Spread | Mean Reversion Trading Using Options

FEB 2021: SPOT $310 – $320 Bull Call Spread

Stock

SPOT

Trade Structure

$310- $320 Call Spread

Trade Date

2/3/2021

Price Paid

$500

Expiration Days

03/19/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

SPOT gapped down all the way from $350 to $310 on a slight earnings miss. I took this trade based on the support which is approximately between $305 or $310 levels. The stock is still under some pressure and may stay like that for a few days before recovering from this downward movement. We have until 3/19 for this to play out, so no hurry here.

SPOT_310_320_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 today.

N/A

Bollinger Bands outside Keltner Channels

Bollinger bands are clearly outside the Keltner Channels.

CHECK

RSI Analysis

This is a post earnings trade. Our regular indicators don’t apply here since all these trades are taken based on Support/Resistance levels. I have described these in the 2nd edition of my book as well.

N/A

ADX Analysis

N/A

Trade Analysis

We experienced a massive 12% correction in Nasdaq which lasted 1.5 months. Needless to say, many trades during this period became losers. This is the reason why I teach strict money management and capital allocation rules in our private trading group (Also, detailed in my book)