MAY 2021: ALGN $597.5-$602.5 Bull Call Spread

Stock

ALGN

Trade Structure

$597.5- $602.5 Call Spread

Trade Date

5/3/2021

Price Paid

$250

Expiration Days

6/11/2021

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

Even after a comfortable earnings beat, ALGN dropped like a rock and I entered this trade a little too early based on the support at 597. ALGN pierced through 2 support levels and dropped all the way down to 560 before bouncing back up. Although, ADX and RSI were not agreeing with me at the time I put on this trade (and I ignore them for post-earnings trade anyway esp. If I take these trades within 1-3 days of earnings), now they are clearly showing signs of a mean reversion in our favor.

ALGN_597_602_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

CHECK

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

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

Trade Analysis

Interesting trade. The trade was a loser during most of the expiration cycle. I have so many winners this week that, I took some risk off the table by closing it at 50% loss when I got the chance. Several of our group members were able to close it for full profit. My goal is always to have winners > losers, so I usually don't bother about these trades as long as I am getting the outcome I am always shooting for.