JUN 2021: MMM $190 – $195 Bull Call Spread
Stock
MMM
Trade Structure
$190- $195 Call Spread
Trade Date
06/24/2021
Price Paid
$250
Expiration Days
7/30/2021
THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.
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Trade Rationale
Here is a simple mean reversion trade. The chart is not a perfect text book trade, but those perfect setups are rare anyway. That is where judgement/experience comes into play. Most of the mean-reversion indicators are all in place. DI- had started turning down starting 6/18 and RSI also bounced back up after being in oversold territory. As far as the price action is concerned, the downward momentum seems to have stopped and the stock is now going sideways with intermittent green days showing up every now and then since 6/18.
Trade Selection Criteria
Overall market movement
May sell-off is behind us and markets are in decent shape. There is no exaggerated movement in the overall markets and this trade is based on purely this stocks own movement.
No Earnings or Significant News
Earnings are behind us and were announced on 4/27
Bollinger Bands outside Keltner Channels
Bollinger bands are clearly outside Keltner Channels.
RSI Analysis
RSI is popping up after being in oversold zone
ADX Analysis
DI- and DI+ are both agreeing as pointed in the chart above.
Trade Analysis
MMM languished around in a trading range throughout this trade, so had to wait almost 2 days before expiration to close this for 94% ROI. If the stock takes in your direction immediately, then you can close these trades in as early as 10-14 days. In the end, profit is profit!
Trade Outcome
WINNER
Profit/Loss
$235
Beginning Account Balance
$14,500
Ending Account Balance
$15,400