July 2020: BIDU $120 – $125 Bull Call Spread
Stock
BIDU
Trade Structure
$120 - $125 Bull Call Spread
Trade Date
07/14/2020
Price Paid
$250
Expiration Days
08/14/2020
THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.
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Trade Rationale
This is not our first stint with BIDU. We had some profitable trade on it in the past. The rationale is the same as with other trades in this round like CRM, A above, so I will not repeat myself.
Trade Selection Criteria
Overall market movement
The market has been going up non-stop for 10 days, and we got a quick pullback today, when DOW dropped more than 300 points today.
No Earnings or Significant News
Earnings are behind us and were announced on 5/18
Bollinger Bands outside Keltner Channels
Bollinger Bands are outside Keltner Chanels.
RSI Analysis
RSI is smack in the middle (i.e not oversold or overbought)
ADX Analysis
ADX is pointing down and below 25, indicating that the downward pressure is not sustainable.
Trade Analysis
BIDU had an original earnings date of 8/17. That is why I chose 8/14 expiration for this trade to avoid earnings. However, they changed their earnings date to 8/13 which forced us to close this trade out earlier for a mere $15 profit. Otherwise, this would have been a fully profitable trade.
Also, notice what happened after earnings. That is why I don't trade earnings because of the gambling nature of earnings. The stock can go either way once the earnings announcement is made. In our case, we would have lose all our money if we had held on.
Trade Outcome
SCRATCH
Profit/Loss
$15
Beginning Account Balance
$5,400
Ending Account Balance
$6200
