Oct 2021: FB $325- $330 Bull Call Spread
Stock
FB
Trade Structure
$325-$330 Call Spread
Trade Date
10/26/2021
Price Paid
$250
Expiration Days
11/26/2021
THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.
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Trade Rationale
FB, GOOG and other social media ad-related companies had a nasty gap down on 10/21 when SNAP announced a huge earnings miss blaming it all on loss of ad-revenue due to IOS 14 privacy related changes. FB did beat eps estimates a few days later and I put this trade based on support around $325. But it kept dropping all the way down to $310 before recovering. The recent reorg and Meta news has turned the tables in our favor and this trade looks pretty decent at this point. Congrats to those who were able to get the trade at lower strikes!
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.
No Earnings or Significant News
This is a post earnings trade and earnings were announced before market open
Bollinger Bands outside Keltner Channels
Bollinger bands are clearly outside Keltner Channels
RSI Analysis
Trade was taken purely based on price/action
ADX Analysis
Trade was taken purely based on price/action
Trade Analysis
Pretty crazy ride on this trade. I took this trade right after earnings after seeing price stabilizing around $325. However, the bottom literally fell out from under FB and it dropped all the way to $308 in the coming days. Although, we did close the trade out for a full profit today, but this highlights an important thing. I take all my trades based on the simple rules that I have laid out in my book. Some trades work out in my favor and some don't. I am not trying to pick all winners here (nor does any successful trader). The goal always is to have winners > losers in each expiration cycle. That is all it takes to become a profitable trader!
Trade Outcome
WINNER
Profit/Loss
$235
Beginning Account Balance
$24,100
Ending Account Balance
$23,500