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DEC 2020: REGN $495 – $505 Bull Call Spread

Stock

REGN

Trade Structure

$495- $505 Call Spread

Trade Date

12/03/2020

Price Paid

$500

Expiration Days

01/15/2020

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

REGN $495 - $505 Bull Call Spread - You may find this trade slightly unusual. And although I only look at 3M daily charts, I did consult a yearly chart to see if there are any signs of support showing up on a larger time frame. An apparent support is showing up at $490 based on this chart. You could argue with me that I may have jumped in too early as there are no clear signs of a recovery here and the stock could stay under pressure for some more time. This trade is based on support/resistance, giving it 1.5 months to recover (1/15 expiration) and the fact that REGN got an FDA approval of their COVID anti-body cocktail. There is no real reason for me to be bearish. And all I am asking for is a small move to $505 in 45 days.

Trade Selection Criteria

Overall market movement

There is no extreme movement in Nasdaq. This was a post-earnings trade, so the regular market indicators are not as relevant. I have talked about these trades in the second edition of my book. 

No Earnings or Significant News

Earnings are behind us and were announced on 11/17

Bollinger Bands outside Keltner Channels

Bollinger bands are clearly outside the Keltner Channels.

RSI Analysis

This trade is based on Support/Resistance. ADX is not applicable.

ADX Analysis

This trade is based on Support/Resistance. ADX is not applicable.

Trade Analysis

This was a really interesting trade. We had a total of 8 trades expiring in our group on 1/15. 5 were clear winners and 3 appeared to be losers until the last few days. However, REGN miraculously turned back up and made this trade a winner. Many members were able to make the EQIX trade a winner too. The only interesting point about this trade is that it shows how cool vertical spreads are. If you had bought a naked call option you would have been completely wiped out because of the chop zone REGN got stuck in. With calls Theta or Time Decay would have worked against you, slowly bleeding your call away down to $0. But since we had the spread on, we didn't lose any value and in fact closed this trade as a winner!

Trade Outcome

WINNER

Profit/Loss

$450

Beginning Account Balance

$8,700

Ending Account Balance

$10,700

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