Mar 2020: AAPL $250 – $255 Bull Call Spread

Stock

AAPL

Trade Structure

$250 - $255 Bull Call Spread

Trade Date

03/19/2020

Price Paid

$275

Expiration Days

05/15/2020

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

Mar 2020: AAPL $250 - $255 Bull Call Spread. With the ongoing Coronavirus scare, and the deep sell-off we have experienced, some of my stocks are showing some signs of a reversal. AAPL being one of the rock-solid blue chip companies out there, I am always looking for trades in AAPL. In this trade, you will notice that all indicators haven't lined up. However, notice my RUT and BKNG trades I executed on the same day. The signs were much clearer on those trades. Think of a bunch of boats riding on top of a huge wave in a storm. The wave takes all the boats down and up with it. So, the same rationale more or less applies to all the trades I have done on this day.

Trade Selection Criteria

Overall market movement

We have experience an unprecedented sell-off in the markets due to the ongoing Coronavirus scare

CHECK

No Earnings or Significant News

We were forced to give this trade 57 days to work in our favor due to the market conditions. However, the next earnings are on 5/5 which means they coincide with our expiration cycle. I will be closing this trade at least 10 days before earnings.

CHECK

Bollinger Bands outside Keltner Channels

This is a no-brainer! Bollinger Bands are way outside Keltner Channels. 

CHECK

RSI Analysis

RSI has been in oversold zone for some time. However, it is not showing any signs of a clear reversal yet

INDETERMINATE

ADX Analysis

ADX is not showing clear signs. And DI+ is just begin to point downwards. However, we cannot consider any of these as clear signals. 

INDETERMINATE

Trade Analysis

You will notice that AAPL kept dropping all the way to $215 in the days following this trade. One could have got in at many different price points. But, getting at a lower price point hardly matters in a debit spread. All we care about is that it should expire above our short strike. With enough time to go, we are hoping a market recovery will catapult AAPL towards $300. We closed this trade today because AAPL earnings are coming up on 4/30 and I always avoid earnings due to the binary/lottery ticket nature of the event. We didn't double the money on this trade, however we still booked a neat profit of 50%. Some of our members who got in at a lower price have booked upto 80% profits.

Trade Outcome

PARTIAL WINNER

Profit/Loss

$140

Beginning Account Balance

$2,500

Ending Account Balance

$N/A

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2 Comments

  1. Marius Blac
    Marius Blac on September 5, 2020 at 7:47 pm

    Hi, just finished ur ebook, great read thx. With market conditions very volatile in march would it be worth writing bull calls itm to lower risk but bring in less premium

    Reply
    • Nishant
      Nishant on September 7, 2020 at 8:38 am

      It is all about getting an edge in the stock market. I gain my edge by trading extremes and using technical analysis. Trade structure will usually not give you an edge (i.e selling spreads vs buying spreads is not where the money is).

      Reply

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