MAR 2021: SQ $240 – $245 Bull Call Spread
Stock
SQ
Trade Structure
$240 - $245 Call Spread
Trade Date
2/24/2021
Price Paid
$250
Expiration Days
04/01/2021
THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.
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Trade Rationale
SQ initially shot up from $247 to $261 on an earnings beat. However, it got dragged down with the market in the subsequent days. I took this trade on a support level which exists around $242ish. But the stock continued to fall after that giving many of our traders better entry points. If you missed this trade, it can be a good trade for next week.
Trade Selection Criteria
Overall market movement
N/A – This is a post earnings trade. Overall market movements are not as applicable as they are to our regular mean reversion trades
No Earnings or Significant News
This is a post earnings trade. Earnings were just announced on 2/23
Bollinger Bands outside Keltner Channels
Bollinger bands are clearly outside the Keltner Channels.
RSI Analysis
RSI is turning up
ADX Analysis
DI- although flat is now turning down.
Trade Analysis
SQ got brutally dragged down by the broader market sell off and although it almost recovered by 4/1 but not enough for us to recover my money on this trade. There are no guarantees in the stock market and deep corrections and pullbacks are part of the market cycles. The risk management and capital allocation rules that I teach our private members (also mentioned in my book) is what will save you from these corrections.
Trade Outcome
LOSER
Profit/Loss
$-250
Beginning Account Balance
$13,500
Ending Account Balance
$10,100
