Nov 2019 – TSLA $347-$337 Put Debit Spread
$347 - $337 Put Spread
With earnings behind us on 10/23, TSLA shot up to the moon. I put on an earlier $320 - $310 Debit Put Spread trade for a short 17 days to see if TSLA gives up some of those gains and normalizes a little. The trade went in my favor immediately, however, after the "China Deal", the market kept roaring higher and TSLA reversed and just kept going against me. My directional bias hasn't changed at all and I still think the market is overdue for a correction. Hence this new trade. A TSLA $347 - $337 Put Debit Spread for $483. My directional bias is based on my simple trading principles and I always stick to it. Sometimes, I lose money on my trades, but that is part of the game. The overall goal is to win more than you lose. That is how you come out a winner in this game.
Trade Selection Criteria
Overall market movement
Market just hit an all time high with SPY touching $309 for the first time.
No Earnings or Significant News
Earnings are behind us and were announced on 8/23. There is no significant news or earnings event during our trade cycle.
Bollinger Bands outside Keltner Channels
Bollinger Bands are outside Keltner Channels. We are not in a squeeze or low volatility period.
RSI is in overbought territory. Although, inconclusive and not giving any clear signals.
ADX being a lagging indicator is not showing anything conclusive. However, DI+ line is curving down and could indicate a loss of positive momentum
We got into this trade with a good gut feeling. Notice that, ADX was not in our favor though. After putting on this trade, TSLA never really gave us the opportunity to take any profit. It got stuck in a range for some time and then went on to make new highs. I had to close this trade when I lost 50% of my initial investment. i.e $248
Beginning Account Balance
Ending Account Balance
Hi. I find your web and challenge very interesting. Is there any way to follow your trades in real time so we can copy them and try to fullfill the challenge?
Unfortunately, there are legal implications in providing financial/trading advice. That is the reason why we don’t push out updates in real-time or telling people to follow our trades. We are forced by law to provide this as educational information only. Our hope is that by following our trades and hopefully practicing them using paper-trading, you will be able to pick up on what we do and apply it to yourself. There is no rocket-science here. Just simply trading rules and training the eye.
Allright, I understand your point.
Just another quick question: do you use any type of hard or mental stop or if the trade goes against you just let it expire worthless?
I have mentioned in my book, how I deal with losing trades. I simply close them out when I lose 50% of my initial investment.
Nishant–Do you every close out your orders early? Or do you just let them run? If you do what would be your advice on that? Seems kind or risky to lose $900 trying to capture the last $100.
I close between 70% – 100% profit. Depending on how the stock is behaving. I totally agree with you that it is not worth holding on and trying to squeeze out the last few dollars. But if the stock has gone in my direction and my spreads are deeep in the money, I take 100% profits. But if it keeps zig-zagging during the duration of my trade, I close them at a decent profit.
Thank you that makes sense.
Hey Nishant, I have read your book and want to say thanks for sharing your ideas. My question is, in recent times market has been moving drastically based on even a single tweet. As we know a bullish momentum can be pumped every now and then through random external factors or events. Sometimes I feel that technical analysis is no match for such factors. So, given the ongoing bullish momentum in market, how safe is it to be on bearish side? How do you steer away from such random events that occur every now and then that can easily prove us wrong quickly?
Neeraj, that is a great question. I do agree with you the market has been going up like crazy. But I still follow my rules for putting on trades on market extremes. If you are in our FB group, you may have noticed that I closed 90% of my last round of bearish trades on a profit even after this volatility. I did lose out on a few trades. But as long as your overall outcome is positive, it doesn’t matter. Anyway, I would like to summarize some points here that may help answer your question:
Just remember the high level picture. Winners > Losers. It is as simple as that. You should be winning more than losing and your net liq should keep going up. As long as you stay focused on that high level goal, you can make things work irrespective of the market environment.
Thank you & makes sense.
Nishant, what are your Keltner channel settings? Thanks!
My settings are the standard settings on TinkorSwim as follows:
Displacement – 0
Multiple Factor – 1.5
Length – 20
True Range Average Type – Simple
Average Type – Simple
Thank you for this, I had the exact same question.