NOV 2020: ETSY $120 – $125 Bull Call Spread
Stock
ETSY
Trade Structure
$120-$125 Call Spread
Trade Date
11/09/2020
Price Paid
$250
Expiration Days
12/18/2020
THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.
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Trade Rationale
ETSY initially shot up to $145 after an earnings beat. However, due to the rotation out of the tech sector every single tech stock in Nasdaq is currently under pressure. Etsy dropped down to $120 which is a well established support level, causing me to take this trade. In addition to a well-established support level, the DI- indicator is also showing that the downward pressure may have fizzled out at this point.
Trade Selection Criteria
Overall market movement
Nasdaq has been under pressure for last 2 days causing a massive sell-off in all tech stocks
No Earnings or Significant News
Earnings are behind us and were announced on 10/28
Bollinger Bands outside Keltner Channels
Bollinger bands are clearly outside the Keltner Channels.
RSI Analysis
RSI is flattening out indicating the downward pressure may have slowed down. However, it is still inconclusive.
ADX Analysis
DI- is clearly pointing down indicating that the downward pressure on Etsy is at its end.
Trade Analysis
ETSY took off like a rocket after we put on this trade. It is impossible to pick bottoms, but in this case we literally picked the bottom. The trade closed in 20 days for a full 94% profit.
Trade Outcome
WINNER
Profit/Loss
$235
Beginning Account Balance
$7,700
Ending Account Balance
$8200
