MAR 2021: WDAY $240 – $250 Bull Call Spread

Stock

WDAY

Trade Structure

$240- $250 Call Spread

Trade Date

3/3/2021

Price Paid

$500

Expiration Days

04/09/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

WDAY got brutally punished even after an earnings beat (The reason why I treat earnings as gambling and don’t trade earnings). But the market sell off really dragged it down beyond multiple support levels. I entered WDAY around $240, but it did drop to $222 before recovering and closed on Friday around $237. As with all these trades, what we are looking at right now is not the individual stock but the overall market to recover. Whether the individual stocks we trade are doing good or not has become completely irrelevant at this point.

wday_240_250_CallSpread_Open | Mean Reversion Trading Using Options

Trade Selection Criteria

Overall market movement

N/A this is a post earnings trade. The individual stock’s price action is more important for these trades.

N/A

No Earnings or Significant News

This is a post earnings trade. Earnings were announced on 2/25

CHECK

Bollinger Bands outside Keltner Channels

Bollinger bands are clearly outside the Keltner Channels.

CHECK

RSI Analysis

This is a post earnings trade. Our regular indicators don’t apply here since all these trades are taken based on Support/Resistance levels. I have described these in the 2nd edition of my book as well.

N/A

ADX Analysis

N/A

Trade Analysis

WDAY got dragged down initially due to the broader market sell off in Nasdaq. It then recovered and pretty much stayed stuck in a slow side ways pattern. If you had bought naked Calls during this period, you would have lost your entire investment due to time decay.

wday_240_250_CallSpread_Close | Mean Reversion Trading Using Options

Trade Outcome

WINNER

Profit/Loss

$450

Beginning Account Balance

$11,500

Ending Account Balance

$11,100

Grow 00 into ,000 in a year or less (1) | Mean Reversion Trading Using Options

Copy of Untitled | Mean Reversion Trading Using Options

To follow along the strategies we use in the $25K challenge, we recommend that you get the strategy book which explains the whys and wherefores of our method. Get it here=> https://amzn.to/2MUOCE5

2 Comments

Maggie on April 8, 2021 at 9:18 pm
I’m confused. Is there a typo? You said it closed at 237, but chart shows 257. Also, if it was a gain of $450, then why did the account balance go down from $11,500 to $11,100?
- Nishant on April 9, 2021 at 6:10 am
  Hi Maggie, it is not a typo. I did not say I closed the trade at $237, I had mentioned that the stock dropped all the way down to 237 when I opened it before recovering. About your second question, my portfolio balance is affected by all the trades that I have open at a time. 1 profitable trade will not make it go up. Nasdaq was in a huge correction in March and I had some losers which affected the portfolio negatively.