MAY 2021: CRSP $110-$115 Bull Call Spread

Stock

CRSP

Trade Structure

$110- $115 Call Spread

Trade Date

5/5/2021

Price Paid

$250

Expiration Days

6/11/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

CRSP has been selling off since 4/27 after an earnings miss and I had been waiting for it to get down to the support at $112. This trade is really simple and my reasoning is just based on the support at $112. CRSP did blow past support and still hasn’t recovered yet, so it needs to be seen how it behaves next week as there is no clear direction yet.

CRSP_110_115_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

I love these trades which highlight why spreads are superior to naked calls. Look at how CRSP just went against me and chopped around the whole time during the duration of this trade. If you were unlucky enough to buy naked calls on this, you would have lost 100% of your investment on this trade. But spreads are resistant to the "evil greeks" and we were able to close this trade for full profit.