Sep 2019: AMZN $1735- $1755 Bull Call Spread
Stock
AMZN
Trade Structure
$1735-$1755 Bull Call Spread
Trade Date
09/26/2019
Expiration Days
10/18/2019
Trade Rationale
AMZN is mostly range bound and is bouncing back and forth between the Keltner Channels. Trying out this bull call spread and will likely close it as soon as I see any decent profit. This is a departure from my typical trades where I want to make sure that the Bollinger Bands are way outside the Keltner Channels. With such range bound trades, closing the trade when you achieve a profit of 50%-70% of your target max profit is a good idea.
Trade Selection Criteria
Overall market movement
SPY pulled back from its all time high of 302 to 294 but is showing signs of going back up again. Overall a range bound market
No Earnings or Significant News
Earnings are behind us and the next earnings will be after our expiration cycle.
Bollinger Bands outside Keltner Channels
Bollinger Bands are outside Keltner Channels. However, they are not as extended as I usually like them to be. AMZN is pretty much range-bound here.
RSI Analysis
RSI is in oversold territory, however not showing any clear signs of trend reversal.
ADX Analysis
ADX is weak and indicates that there is no trend in place.
Trade Analysis
As expected, AMZN hardly experienced any movement during our trading window. In fact, it initially went down and we were showing losses. But then it bounced back up and although it was hardly above our short strike. (Amzn was at $1765) we were still able to close the position for a handsome profit.
That is the beauty of debit spreads. If you had bought a call instead of a call spread, the whipsawing market would have caused you to have a loss due to Theta or Time Decay eating into your position.
Trade Outcome
Winner
Profit/Loss
$589
Beginning Account Balance
$9395
Ending Account Balance
$15,000
