Nov 2021: MRNA $225- $230 Bull Call Spread

Stock

MRNA

Trade Structure

$225- $230 Call Spread

Trade Date

10/26/2021

Price Paid

$250

Expiration Days

12/03/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Massive 1000 point drop in DOW!

Our group had been trading at reduced allocations (between 15% – 20%) for weeks now to reduce our exposure to the markets. Today was the day to take advantage of the sudden sell-off and I encourage everybody to stretch their allocations to 30%. Although, the new COVID variant is not something to be taken lightly, this massive drop in the market is an over-reaction in my opinion.

Trade Rationale

MRNA had a gigantic drop of nearly 40% in a matter of 2 days. This was triggered by Pfizer’s good news and exacerbated further by Moderna’s own supply/chain issues and the fact that their vaccine won’t be approved for teens before the year end. Although this is a lot of bad news, a 40% sell-off is a little overdone and unwarranted in my opinion. RSI has plunged into oversold territory and a bounce is overdue.

MRNA_225_230_CallSpreadClose | 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

Trade was taken purely based on price/action

N/A

ADX Analysis

Trade was taken purely based on price/action

N/A

Trade Analysis

I took advantage of the monster over-reaction to Pfizer's good news on many vaccine stocks including MRNA. The stock initially dropped some more against me before turning around and heading in my direction. Today's massive 1000 point drop in the market on COVID news was very favorable for all the trades we had on health stocks and MRNA was one of the winners.

Trade Outcome

WINNER

Profit/Loss

$235

Beginning Account Balance

$24,100

Ending Account Balance

$23,000

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