JUL 2021: UPS $190- $195 Bull Call Spread
THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.
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Trade Selection Criteria
Overall market movement
This was a post-earnings trade. The individual stock’s price/action overrides overall market movements for these types of trades.
No Earnings or Significant News
Post earnings trade taken on the next day of earnings.
Bollinger Bands outside Keltner Channels
Bollinger bands are clearly outside Keltner Channels.
Although, most post-earnings trades disregard mean reversion indicators like RSI/ADX, in this case RSI is in oversold zone which could result in a bounce
Post earnings trade mostly disregard mean-reversion indicators.
Beginning Account Balance
Ending Account Balance
“UPS had good earnings”…. this sentence is based on what? Clearly it’s NOT based on Price Action (because price had a gap down of -more or less- 12 points), so WHO told this?
… and then: what about yours’Book rule:
“with earnings you have to respect the direction of the initial spike. If it is a huge up or down move, it has happened for a reason as the market digests the earnings numbers.”
Following this rule, It was supposed to open a Bear PUT just to “respect the huge down move” instead of a Bull CALL.
Thanks in adavance for your explications.
Paolo great question. I am a mean-reversion trader. Which means I keep the dominant trend of the stock market (bullish right now) and go against the short term exaggerated market reactions or pullbacks. I do a ton of trades like these in our private group with 1200+ traders on a daily basis but it is not possible to cover every single trade setup in the book. That is why you will sometimes see trades show up here which are not mentioned in the book.
Put spreads have horrible win ratio these last 2 years so I am almost exclusively trading call spreads as of now.