June 2020: ROKU $100 – $105 Bull Call Spread
Stock
ROKU
Trade Structure
$100 - $105 Bull Call Spread
Trade Date
06/04/2020
Price Paid
$250
Expiration Days
07/10/2020
THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.
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Trade Rationale
ROKU $100 - $105 Bull Call Spread - This is my first position in ROKU for my own $25k challenge account. But I had published a $115 - $120 Bull Call Spread as a post-earnings "continuation trade" for our members in our private Discord group. Nobody can have 100% winners. So, ROKU was the first loser we experienced since March (1 loser and 19 winners so far). Yesterday, I had to close my ROKU position at a 50% loss of original investment ($125) because we didn't have much time left for expiration and I felt that the chances of ROKU going all the way back up to $115 are a little bleak. If we had more time left, I would have held on to that trade.
This is definitely not a "revenge trade". A "revenge trade" is one where you are not mentally able to accept a losing trade, and you put on another trade on the same stock to get even with your loser. If you have been trading with me for some time, you must have noticed, I just don't let emotions get involved in my trading. With ROKU, my overall outlook on ROKU is still bullish and you must have noticed that I advised all our members to hold on to their ROKUs if they had a further out expiration. If you look at the chart below, $100 is a solid support level for ROKU. Because of this I am trying out another small Bull Call spread.
Trade Selection Criteria
Overall market movement
We had a small pullback in the NASDAQ on 6/4, but nothing major.
No Earnings or Significant News
Earnings were just announced on 5/7 and are behind us
Bollinger Bands outside Keltner Channels
Yes, Bollinger Bands are wildly outside the Keltner Channels
RSI Analysis
RSI is flat and is irrelevant because we are not coming from an oversold situation. (i.e RSI wasn’t below 30 earlier). We used simple Support/Resistance for this trade.
ADX Analysis
ADX is at 15, which doesn’t give us much indication of the trend. Remember ADX should ideally be above 25 to generate reliable results.
Trade Analysis
Our members had multiple trades open on ROKU, ranging from $100-$105, to $108-$113 Bull Call Spread, all the way to $115-$120 Bull Call Spreads. All the members made 94% ROI on this trade, irrespective of where you bought your spread.
Trade Outcome
WINNER
Profit/Loss
$235
Beginning Account Balance
$4,100
Ending Account Balance
$$4900
How is the profit $235 but the account goes from $4100 to $4900?
This is not the only trade I have in June. The net liq of the account is affected by every single trade I have on at a given time.