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Dec 2019 – NFLX $315-$300 Put Debit Spread

Stock
NFLX
Trade Structure
$315 - $300 Put Debit Spread
Trade Date
12/17/2019
Expiration Days
1/17/2020

Trade Rationale

This is another "revenge trade" like TSLA which was a huge mistake on my part. I had put on another NFLX trade on 12/3 which initially went my way but then turned against me. At this point I was so convinced that I was right that I used this opportunity to basically "double-up" on my earlier position.

Trade Selection Criteria

Overall market movement

Market just hit an all time high with SPY touching $322 for the first time.

No Earnings or Significant News

Earnings are behind us and the next earnings are going to be announced on 1/21/2020 which comes after our expiration cycle.

Bollinger Bands outside Keltner Channels

Bollinger Bands are barely outside Keltner Channels. 

RSI Analysis

RSI is not in overbought territory and is still rising.

ADX Analysis

ADX is weak. Reflecting back this convinced me that the upward movement was not sustainable. 

Trade Analysis

This is another revenge trade like TSLA which bit me back. I had put on a trade earlier on12/03 which initially went my way but turned against me. For some reason I put on this trade on 12/17 in order to "average down" or double my position because I had become so convinced that I was right. Turned out that I ended up losing on both of my NFLX trades. The right way to handle this would have been to close out the first loser and not put on a new trade. Having said that, I do want to emphasize that hindsight is 20/20 and you can come up with any rationale to explain your past behavior. But when you are in the meat of the moment sometimes things are not as clear as you would like them to be.
Trade Outcome
Loser
Profit/Loss
$-250
Beginning Account Balance
$15,300
Ending Account Balance
$14,800

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2 Comments

  1. Tony Babel

    Hi, How do you calculate the cost of initial investment? The long call/put + the collateral of short call/put or just the cost of long call/put? Thanks!

    Reply
    • Nishant

      With debit spread it is uber easy to calculate that. The amount you paid to buy the spread is your investment and your amount at risk. There is no collateral here. Collateral comes into play when you are either trading credit spreads or selling naked options.

      Reply

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