OCT 2020: OKTA $215- $220 Bull Call Spread
Stock
OKTA
Trade Structure
$215- $220 Call Spread
Trade Date
10/23/2020
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
This one is a plain-vanilla mean reversion trade. The ones you must have read in the first edition of my book. The rationale is simple, OKTA gave up its earlier gains from this month and dropped all the way to $216. Given that the next support is at $210 level, I put on this trade after noticing that the DI- has flattened out indicating that the downward momentum has lost steam. RSI, although not conclusive is beginning to turn back up and the nasty long red candles have shrunk down in size, giving way to our first green DOJIsh candle.
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 coming up on 12/04, so don’t coincide with our expiration date
Bollinger Bands outside Keltner Channels
Bollinger Bands are way outside the Keltner Channels
RSI Analysis
Although, not conclusive, RSI is beginning to turn upwards.
ADX Analysis
DI- has flattened out indicating that the downward momentum may have lost steam.
Trade Analysis
After putting on this trade, OKTA kept falling and for next 20 days we were showing losses. But it eventually went back up and we made our full profit. This is just how mean reversion trading works. You can't pick bottoms, so after putting on my trades the stocks usually go against me for a few days before finally heading in my direction. In the end, we still got our prize!
Trade Outcome
WINNER
Profit/Loss
$235
Beginning Account Balance
$7,585
Ending Account Balance
$8200
