JAN 2021: VMW $130- $135 Bull Call Spread

Stock

VMW

Trade Structure

$130 - $135 Call Spread

Trade Date

1/13/2020

Price Paid

$250

Expiration Days

02/19/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

VMW gapped down to $130 suddenly after the announcement that their CEO is joining Intel. This extreme drop is an exaggerated market reaction which gives us trading opportunities. Companies which work at the scale of VMW are not dependent on a single person running the show. Companies like VMW have achieved the massive scale by having 100s of very smart employees working together towards a common vision. If you look at the technicals, the stock has solid support at $135, followed by support around $130 and $125. This trade was purely done based on support/resistance levels.

VMW_130_135_CallSpreadOpen | Mean Reversion Trading Using Options

Trade Selection Criteria

Overall market movement

There is no extreme movement in Nasdaq. This was a trade done on the extreme movement on this particular stock

N/A

No Earnings or Significant News

Earnings are behind us and were announced on 11/24

CHECK

Bollinger Bands outside Keltner Channels

Bollinger bands are clearly outside the Keltner Channels.

CHECK

RSI Analysis

N/A This trade was done based on Support/Resistance

N/A

ADX Analysis

N/A This trade was done based on Support/Resistance

N/A

Trade Analysis

The trade worked out beautifully as expected. We took advantage of the knee jerk reaction from the market on irrelevant news. This trade was a no-brainer and closed with 11 days still remaining to expiration.

VMW_130_135_CallSpreadClose | Mean Reversion Trading Using Options

Trade Outcome

WINNER

Profit/Loss

$235

Beginning Account Balance

$10,200

Ending Account Balance

$13,084

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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

4 Comments

Robert Schepens on January 14, 2021 at 2:12 pm
VMW isn’t on either of the Watchlists. Is there a screener you sued to find it?
- Nishant on January 14, 2021 at 2:15 pm
  My watchlist changes every month. Not sure if you are a paid member, but I give the new watchlist to our paid members at the beginning of each month on our Discord group.
Louis Vinci on February 3, 2021 at 6:23 pm
What is Discord? Not about to join since I have no clue what Discord Group is and how to find it. Sounds a bit hokey to me.
- Nishant on February 3, 2021 at 6:33 pm
  Discord is like Facebook. And a Discord group is like a private Facebook group.