MAY 2021: AAPL $125-$130 Bull Call Spread

Stock

AAPL

Trade Structure

$125 - $130 Call Spread

Trade Date

5/4/2021

Price Paid

$250

Expiration Days

06/11/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

To participate in our live challenge and to access our online training, please click “Your Account” and upgrade to the “Live Trader” plan.

Trade Rationale

AAPL affects Nasdaq so much that if you compare QQQ and AAPL chart, they look identical at this point. After a nice earnings beat, AAPL rocketed up to $136 and I had originally thought that I will not get a chance to put a trade. But with last week’s sell off, AAPL dropped to a nice support level of $127, allowing me to enter this trade. It has already recovered since then and is looking pretty good at this point.

AAPL_125_130_CallSpreadOpen | Mean Reversion Trading Using Options

Trade Selection Criteria

Overall market movement

Markets have been under pressure since 5/1. Is ‘Sell in May’ becoming a self-fulfilling prophecy?

CHECK

No Earnings or Significant News

This is a post earnings trade and earnings are behind us

CHECK

Bollinger Bands outside Keltner Channels

This is a post-earnings trade. We use support/resistance for these as other indicators are mostly irrelevant for these kind of trades

N/A

RSI Analysis

This is a post-earnings trade. We use support/resistance for these as other indicators are mostly irrelevant for these kind of trades

N/A

ADX Analysis

Although, I use support/resistance for 90% of my post-earnings trades, in this case DI- is flattening out indicating a loss of downward pressure.

N/A

Trade Analysis

AAPL got stuck in a sideways move right after putting on this trade. A drop in Nasdaq followed by a rare analyst downgrade didn't help either. I finally got out of this trade for a 48% loss as I don't see any chance of the trade becoming profitable at this point.