SEP 2020: W $280 – $285 Bull Call Spread
Stock
W
Trade Structure
$280- $285 Bull Call Spread
Trade Date
08/24/2020
Price Paid
$250
Expiration Days
10/02/2020
THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.
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Trade Rationale
W was trading at $280 before earnings. After great earnings, the shot spiked up to new highs and never really gave us a chance to get into a trade on a pullback. Finally on 9/3, we got a nice pullback to pre-earnings level which allowed me to get into this trade. I am risking $250 in this trade to make a potential $250 if W stays above $285 by expiration.
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 are behind us and were announced on 08/05
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
After putting on this trade, W kept dropping like a rock as we are right in the middle of a massive 14% correction in Nasdaq. It fell all the way down to $234. It then slowly crawled out of the lows and by expiration had crossed our short strike. This allowed us to close it for our full profit target. If you had bought a call instead, time decay would have eaten away on your Call option for the next 20 days causing huge losses to show in your account.
Trade Outcome
WINNER
Profit/Loss
$235
Beginning Account Balance
$6,700
Ending Account Balance
$5,900
