Nov 2021: COIN $325- $330 Bull Call Spread

Stock

COIN

Trade Structure

$325- $330 Call Spread

Trade Date

11/11/2021

Price Paid

$250

Expiration Days

12/10/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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the 11th 25k Challenge was successfully completed on 12/18.

I am documenting the last few remaining trades retroactively to wrap up the documentation. Although, Nov month had a ton of losers, one of the core principles of this trading style is to stretch allocation during sell-offs and shrink allocations during peaking markets. I took several trades during the sell-off which ended up cancelling out most losers during this correction. The account is still growing and is around $29,000 in Net Liq right now.

Exposure to Bitcoin via COIN /MSTR

Although we don’t trade cryptocurrency in our group, but COIN and MSTR have been recent additions to our repertoire of stocks. Both of these provide direct exposure to Bitcoin’s movement. This unfortunate trade got absolutely decimated by the recent debacle in Bitcoin though.

Trade Rationale

This is the first trade I have taken on COIN after its IPO. As a general rule, I don’t trade IPO stocks as I am a big advocate of trading stocks with well established trading patterns and some trading history. I have also mentioned in my book that learning the price movement of the stocks in my watchlist by observing them on a daily basis is what makes me see trading opportunities. I only use indicators to confirm my already existing bias for a trade. But the trade idea itself does not come from any fancy indicators or scans but by simply staying in touch with the “personality” of the stocks in my watchlist. I am a computer programmer and creating an indicator or scan is the easiest thing for me, but you will never see me promoting automation when it comes to finding trade ideas. I am just old-school that way. COIN is a simple mean reversion trade where DI- is curving down after shooting up initially. This is followed by RSI also pointing up. Both of these indicate that the price wants to move up. You will find many examples of these trades in my book too.

COIN_325_330_CallSpreadOpen | Mean Reversion Trading Using Options

Trade Selection Criteria

Overall market movement

This is a post earnings trade, the individual stock’s price movement is more important than the overall market.

N/A

No Earnings or Significant News

This is a post earnings trade and earnings were announced a day ago

CHECK

Bollinger Bands outside Keltner Channels

Bollinger bands are clearly outside Keltner Channels

CHECK

RSI Analysis

RSI is sharply curving upwards showing upward momentum is building up.

CHECK

ADX Analysis

DI- was turning down indicating loss of downward momentum

CHECK

Trade Analysis

Although we don't trade Bitcoin and its derivates in our group, we do take trades every now and then which give us exposure to Bitcoin. COIN and MSTR are two notable symbols that we have added to our repertoire. Note that both these stocks are heavily dependent on Bitcoin's performance. After putting on this trade, COIN did go up all the way to $352 but then Bitcoin had its massive pullback from $68K --> $48K and COIN became a victim of this event. This trade was a full loser as I never got a chance to close it at 50% loss.