SEP 2020: WDAY $220- $225 Bull Call Spread

Stock

WDAY

Trade Structure

$220- $225 Bull Call Spread

Trade Date

09/03/2020

Price Paid

$250

Expiration Days

10/02/2020

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

WDAY was my typical post-earnings trade setup. It spiked at earnings, followed by a pullback to pre-earnings level, causing me to jump on this trade with a $220-$225 call spread. Read on to find out what happened next.

WDAY_220_225_CallSpread_Open | Mean Reversion Trading Using Options

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

N/A

No Earnings or Significant News

Earnings are behind us and were announced on 08/27

CHECK

Bollinger Bands outside Keltner Channels

This is a post earnings trade – our regular mean reversion indicators don’t apply here.

N/A

RSI Analysis

This is a post earnings trade – our regular mean reversion indicators don’t apply here.

N/A

ADX Analysis

This is a post earnings trade – our regular mean reversion indicators don’t apply here.

N/A

Trade Analysis

Although, this was typical earnings trade setup and I was expecting it to be fully profitable, it coincided with a massive 14% pullback in NASDAQ in Septmeber. Due to this WDAY kept dropping like a rock all the way down to $195! At this point, I had no hope for any recovery and I added a "bail out" trade for it. Bail out trades are covered in my book's second edition which is due to come out soon. Although, the stock sold off most of the month, but I was able to get out for a scratch (no profit or loss at the end of the month).