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Feb 2020: RUT $1615- $1635 Bull Call Spread

Stock

RUT

Trade Structure

$1615 - $1635 Bull Call Spread

Trade Date

02/03/2020

Expiration Days

03/20/2020

Trade Rationale

Most of my trades in February have been post earnings plays where my traditional indicators don't apply. However, with this trade in the small cap index RUT (Russell 2000) I am back to using my regular indicators and methods. Here I am risking $1125 to make $1125. I am giving myself 45 days for this trade to work out, a little longer than my usual trades. The reason for this is that I want to give the market enough time to bounce back from the volatility caused by the corona virus scare.

Trade Selection Criteria

Overall market movement

DOW dropped a crazy 700 points due to the ongoing corona virus scare, taking down many stocks with it dragging many stocks and indexes down with it.

No Earnings or Significant News

N/A Earnings don’t apply to Indexes and ETFs

Bollinger Bands outside Keltner Channels

Bollinger bands are outside Keltner Channels and the price is touching the lower Bollinger Band

RSI Analysis

RSI bounced back after momentarily touching 30 indicating a trend reversal opportunity.

ADX Analysis

ADX is below 20 indicating the downward movement that RUT has been experiencing since 1/20 has no legs.

Trade Analysis

Since, we achieved our goal, we closed this trade for a "scratch" as part of unwinding the remaining trades. We paid $1125 for this and closed it on 2/24 for $1190

Trade Outcome

Pending

Profit/Loss

$$65

Beginning Account Balance

$16,200

Ending Account Balance

$$23,400

To follow along the strategies we use in the $25K challenge, we recommend that you get the strategy book which explains the whys and wherefores of our method. Get it here=> https://amzn.to/2MUOCE5

2 Comments

  1. Derek R

    Hey Nishant,

    Read your book very recently; you seem to have devised quite a terrific strategy.

    However, am rather perplexed about this RUT trade – especially when you state its still open. If your trade rules call for exiting at a 50% loss, then your loss level on this position should have been hit quite a while back; for RUT has, like the broader market, been dropping like a rock and as of the close on 20th March was priced at just over $1000. If you’ve held the trade all the way(and I doubt you did so), it would have expired worthless.

    I also have other queries after reading your book, but I guess I’ll shoot you an email for those.

    Meantime, looking forward to have your feedback on this one.

    Reply
    • Nishant

      Looks like I forgot to update this trade’s results. I will update today.

      Reply

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