Nov 2019: GOOG $1300 – $1290 Bear Put Spread | Mean Reversion Trading Using Options

Nov 2019: GOOG $1300 – $1290 Bear Put Spread

Stock

GOOG

Trade Structure

$1300 - $1290 Bear Put Spread

Trade Date

11/06/2019

Expiration Days

12/06/2019

Trade Rationale

With stock market ripping upwards and making new all time highs for days, every stock in my watchlist is shooting to the moon. With earnings in the past, and all our indicators lining up and pointing towards a market correction, I bought a $1300 - $1290 Bear Put Spread for my mean reversion trade. I paid $444 for it and will double my money if GOOG expires at or below $1290 in 30 days.

Goog_Nov6 | Mean Reversion Trading Using Options

Trade Selection Criteria

Overall market movement

With S&P 500 making new all time highs, the overall market and practically every stock in my watchlist is making new highs. With the first signs of a loss in upward momentum, it is a great time to put on some mean reversion trades.

CHECK

No Earnings or Significant News

Earnings are behind us and were announced on 10/28. There is no significant news or earnings event during our trade cycle.

CHECK

Bollinger Bands outside Keltner Channels

Bollinger Bands are outside Keltner Channels. We are not in a squeeze or low volatility period.

CHECK

RSI Analysis

RSI is curving downwards after being in overbought zone for some time. But hasn’t crossed down below 70, so is still inconclusive

CHECK

ADX Analysis

ADX is flat. The previous upward momentum is not building any more strength.

CHECK

Trade Analysis

GOOG went side ways after putting in this trade and kept teasing us throughout the expiration cycle bouncing between profits and losses. But in the last few days it just took off causing this trade to be a loser and not giving us enough time to exercise the 50% loss rule.