JUN 2021: ADSK $272.5 – $277.5 Bull Call Spread | Mean Reversion Trading Using Options

JUN 2021: ADSK $272.5 – $277.5 Bull Call Spread

Stock

ADSK

Trade Structure

$272.5- $277.5 Call Spread

Trade Date

6/3/2021

Price Paid

$250

Expiration Days

7/2/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

After a comfortable earnings beat, the stock has been selling off due to profit taking and I had been waiting for an opportunity to show up on ADSK. Strong support lies at $275 and $267. I entered this trade based on the support around $275. RSI and ADX were not confirming my bias when I put on this trade, but you can clearly see now that all our indicators are confirming my directional bias at this point.

ADSK_272_277_CallSpreadOpen | Mean Reversion Trading Using Options

Trade Selection Criteria

Overall market movement

May sell-off is behind us and markets are in decent shape. This is a post-earnings trade and the overall market movement is not as relevant for these trades.

N/A

No Earnings or Significant News

This is a post earnings trade and earnings are behind us

CHECK

Bollinger Bands outside Keltner Channels

This is a post-earnings trade. We use support/resistance for these as other indicators are mostly irrelevant for these kind of trades

CHECK

RSI Analysis

Although, this is a post earnings trade, our regular mean reversion indicators have joined forces and giving my directional bias more conviction

CHECK

ADX Analysis

Although, this is a post earnings trade, our regular mean reversion indicators have joined forces and giving my directional bias more conviction

CHECK

Trade Analysis

ADSK initially went against me for the next 2 weeks before recovering. If you had bought a regular call option, you would have lost most of its value in these 2 weeks due to time decay. However, debit spreads are resilient to this and we were able to close our trade for 94% ROI.