JUN 2021: BDX $235-$240 Bull Call Spread

Stock

BDX

Trade Structure

$235- $240 Call Spread

Trade Date

6/2/2021

Price Paid

$250

Expiration Days

7/2/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

BDX has been stuck in a squeeze ever since its earnings came out. You can clearly see it chopping up and down between $238 and $248 at this time. I entered this trade at the lower end of the trading range, which means I just need it to stay at or above $240, even if it doesn’t break out of the squeeze by expiration.

BDX_235_240_CallSpreadOpen | Mean Reversion Trading Using Options

Trade Selection Criteria

Overall market movement

We are past the may sell-off and markets are looking stable. This is a post earnings trade taken purely on an individual stock’s movement. The overall market movement is not as relevant.

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

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

N/A

ADX Analysis

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

N/A

Trade Analysis

This turned out like a typical swing trade. Some of our traders asked me why I entered this trade when I usually avoid stocks which are in a squeeze (BBs inside KCs). The reason I avoid those trades is because stocks in a squeeze have a tight trading range and it is hard to profit from it. In this case, BDX had a $10 trading range and we entered the trade right at the bottom of the squeeze.