SEP 2020: DOCU $210 – $220 Bull Call Spread
Stock
DOCU
Trade Structure
$210 - $220 Call Spread
Trade Date
09/04/2020
Price Paid
$500
Expiration Days
10/16/2020
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
We have seen this setup before in ANET. I can't explain all my setups in advance as the stock market is an ever-changing environment, but I do get into details when those setups show up. The way this setup works is - you will see a run up before earnings. Don't ask me why it happens (insider trading? news leaks?). I don't know and I don't care. The bottom-line is that it does happen a lot. When you see a nice pre-earnings run up and you are scratching your head, you can almost rest assured that it will be followed by post-earnings profit taking even if the earnings report were great (Unless it is TSLA which defies all logic and rational thinking). We saw a similar pattern on DOCU. Instead of figuring out why it is happening, our job is to find out when to get in to a trade in these situations. You will see that I got into a trade based on simple support/resistance.
Trade Selection Criteria
Overall market movement
This is a post-earnings trade. My usual mean reversion parameters don’t apply here. These trades are based on Support/Resistance only
No Earnings or Significant News
Earnings were announced on 9/3 and are behind us.
Bollinger Bands outside Keltner Channels
This is a post earnings trade – our regular mean reversion indicators don’t apply here.
RSI Analysis
This is a post earnings trade – our regular mean reversion indicators don’t apply here.
ADX Analysis
This is a post earnings trade – our regular mean reversion indicators don’t apply here.
Trade Analysis
Analysis will be updated when I close the trade.
Trade Outcome
PENDING
Profit/Loss
$0
Beginning Account Balance
$6,725
Ending Account Balance
$PENDING