OCT 2020: BIIB $260 – $265 Bull Call Spread
Stock
BIIB
Trade Structure
$260-$265 Call Spread
Trade Date
10/22/2020
Price Paid
$250
Expiration Days
11/27/2020
THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.
To participate in our live challenge and to access our online training, please click “Your Account” and upgrade to the “Live Trader” plan.
Trade Rationale
With BIIB, the stock tanked before earnings. The earnings were actually good. Even if there was no earnings event, this kind of dramatic move would have caught my mean reversion mentality and I would be looking for an opposite trade anyways. To add to that, the stock is actually trading at a well established support of $260, which caused me to jump at this trade. All we need is for it to stay at $265 or above, and we will make our 94% ROI on this trade.
Trade Selection Criteria
Overall market movement
The markets have been under pressure due to rising COVID cases and elections right around the corner.
No Earnings or Significant News
Earnings are behind us and were announced on 10/21
Bollinger Bands outside Keltner Channels
This is a post-earnings trade. Our normal mean-reversion technical indicators don’t apply here.
RSI Analysis
This is a post-earnings trade. Our normal mean-reversion technical indicators don’t apply here.
ADX Analysis
This is a post-earnings trade. Our normal mean-reversion technical indicators don’t apply here.
Trade Analysis
This is a very unusual trade. I put on this trade originally for 11/27 expiry. But I learnt that there was a binary event pending on 11/06 (FDA decision). Since, I don't trade binary events, I decided to close it before 11/06. However, right after putting on this trade, BIIB kept sliding all the way down to $243 not giving me an opportunity to close. Finally, today for whatever reason (FDA leak?) the stock shot up 44%. That is $100 in a single day and I was able to close this position out for break-even.
Trade Outcome
SCRATCH
Profit/Loss
$0
Beginning Account Balance
$7,585
Ending Account Balance
$7,600
