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Feb 2020: TSLA $690- $700 Bull Call Spread

Stock

TSLA

Trade Structure

$690 - $700 Bull Call Spread

Trade Date

02/06/2020

Expiration Days

03/20/2020

Trade Rationale

TSLA shot up 40% in 2 days and was the talk of the town for the last few days. Since, I missed the initial up-move, I was waiting for a pullback. And we got a nice pullback today morning. I was able to get in and buy a $690-$700 Bull Call Spread. I am risking $500 to make $500 on this trade.

Trade Selection Criteria

Overall market movement

The market just recovered from the corona virus scare. However, this was not a decision making factor for this trade.

No Earnings or Significant News

Earnings are behind us and were announced on 1/29/2020

Bollinger Bands outside Keltner Channels

This is not a normal trade by any means. But yes, the Bollinger Bands are definitely outside the Keltner Channels, which is evident by the crazy volatile moves this stock has experienced in the last 2 days.

RSI Analysis

N/A – With the kind of wild moves TSLA has experienced in the last two days, RSI is not a contributing factor for this trade

ADX Analysis

NA – With the kind of wild moves TSLA has experienced in the last two days, ADX is not a contributing factor for this trade’s decision.

Trade Analysis

This trade worked out as expected. TSLA shot up 40% in 3 days for whatever reason. It doesn't matter to us. The hind sight analysts at CNBC will call it short squeeze or whatever else. But I was waiting for a pullback after that crazy movement. And the stock did pull back all the way back to the trend line (i.e the support), and that is where I was able to get in with my trade. I was able to double my money in 14 days on this trade.

Trade Outcome

WINNER

Profit/Loss

$467

Beginning Account Balance

$19,350

Ending Account Balance

$21,250

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

27 Comments

  1. G S

    You mean 690 – 700 call spread?

    Reply
    • Nishant

      Yes. Thanks for pointing that out. I have updated the post.

      Reply
  2. murali konakanchi

    Hi Nishant, I read your book, its awesome. Options are very complex, you simplified it to one strategy and provided great examples.

    BTW, TSLA trade, you already met you goal and TSLA is falling now. How do you react in this scenario. Do you keep trade until end date? or already closed the trade.

    I am not clear about why we need wait quite long after you Option already ITM, until end date.

    Reply
    • Nishant

      Murali,
      I am glad you liked my book. Thanks for your kind words. One thing about spreads is that you have to wait a little for them to yield their maximum profit. Yes, TSLA passed my strike price in 2 days after putting on the trade, however I still need to wait for at least 2 weeks for the profits to start showing up. If you had a bought a call (which I don’t recommend at all) then you will see the full profit in minutes and can close the trade. But you also see losses mount up with calls in seconds, which causes your emotions to make wrong decisions. With spreads, they are resistant to +ve or -ve movements in the first couple of weeks and allow you to treat the trade more objectively without emotions.

      Hope that helps! Also, if could leave a review for my book, I will greatly appreciate it.

      Reply
  3. Jeffery Orr

    Hey Nishant, I also just finished your book recently and passed it to a neighbor who also trades. I’m currently in MSFT and FFIV, but last night I had AMZN on my list although I never went in as I was viewing charts with longer periods to compare movement and missed out on today’s initially jump. Do you ever do the same or do you stick with the information on the 3m:1d chart when justifying a trade? Thanks in advance!

    Reply
    • Nishant

      Hi Jeff, I am glad you liked the book. Since, my trades typically last 30-50 days, I stick to the 3M 1 day chart as it goes nicely with my trading window. Longer or shorter charts don’t help me much as I am not a day trader, neither do I hold stocks for long periods.

      Also, if you remember, I have mentioned in my book that I have a small watchlist and I follow these stocks on a daily basis, so I am always instinctively aware if they are oversold or overbought. I just use charts and technical as a confirmation for my trade bias. So, the trade bias comes first, followed by charts/technicals for confirmation. Hope that makes sense?

      Also, if you don’t mind, kindly leave a 1-line review for my book. It will be greatly appreciated.

      Reply
  4. Anirudh Prem

    Great work Nishant, I have your book – excellent read! & looks like the trades are definitely working. I will keep a close eye on the next challenge!

    Reply
    • Nishant

      Thanks for the kind words Anirudh. If you liked the book, please leave a review for me. I will greatly appreciate it.

      Reply
  5. Anirudh Prem

    Nishant, will do. I understand the challenge is over but on big down days like today I am curious what would your moves be !

    Reply
    • Nishant

      I have mentioned in the book how deal with days like today. DOW dropped 300 points that makes my radars go up, but I will not put on a trade today. I will watch for the next few days how the market is reacting, if the fall continues, I will wait for the first signs of exhaustion before I put on a trade.

      Reply
  6. Anirudh Prem

    Thanks Nishant!

    Reply
  7. Mario Jaehn

    Hi Nishant, I’m a bit surprised seeing trades like this TSLA trade here making it count for the challenge since they never were mentioned in the book. Here you took TSLA long, but according to the rules in the book, it was more a short setup. So this is a bit of a conflict to me. Nevertheless I like the book and the strategy a lot.

    Reply
    • Nishant

      Hi Mario,
      Glad you liked the book. This trade is an exception since it happened right after earnings. Earnings change a stock’s personality and the way stock will trade in the future. So, the earnings trades are a little different. When I start the next challenge (starting in 10 days), I will cover all this.

      Reply
  8. Bob Cash

    Hi Nishant – would your strategy work in the current environment? Technical indicators have limitations when emotions run this high. At what time will you consider getting back into the market and trusting your system again?

    Reply
    • Nishant

      Definitely not. My strategy is very directional in nature. That is why I am holding off to start the next challenge until the market stabilizes and shows some direction. The next challenge was supposed to start on March 15th, but I will wait it out.

      Reply
  9. Humble Tradesman

    Hi Nishant. Just finished reading your book also and came to explore your website. Well-written book and I might consider joining the premium members section for the 25k challenge.

    Do you still anticipate the challenge to go on as planned, given the current market conditions?

    Also, do you think your spread strategy could be used for day-trading? Thanks.

    Reply
    • Nishant

      Hi,

      I am glad you enjoyed the book. Yes, we just started the challenge on 3/19. We are treading carefully trying out small positions first and longer time frames. I don’t do day trading, so cannot comment on that. The smaller time frame for day trades wreaks havoc on one’s emotions causing you to behave irrationally, so generating consistent income from that is quite challenging. If you do consider joining the challenge, email admin@25ktoptionschallenge.com for your early bird coupon.

      Nishant

      Reply
  10. John Sticher

    I bought your book today on Amazon and think it is great. I too got lucky there for awhile buying SPY call options without a spread and of course got slaughtered eventually wiping out all my gains in one loss.

    Your book was exactly what I was looking for.

    Reply
    • Nishant

      I am glad I am able to share my experience and method with fellow traders.

      Reply
      • John Sticher

        I do have one question since I am new to bull credit spreads, do you generally close out the trades before expiration normally?

        The reason I am asking is everything I read mentions the risk of assignment and other problems if you hold the option until expiration even if both calls are in the money.

        I am unclear about how to best ‘close the trade’ the right way to make the most profit.

        Thank you,

        John

        Reply
        • Nishant

          Yes, I close my bull spread before expiration. Even if you forget to close it, the broker will automatically close it for you. In the last 10 years I have been assigned only twice. And even if assignment happens, the long call cancels out the short.

          Reply
  11. Enoch Hurst

    Awaiting your next challenge.

    Reply
    • Nishant

      We have traders at different stages join in all the time. Due to the way, I run the program, the time you join or your balance doesn’t matter. Our traders join with balances ranging from $1000 all the way to $100K.

      Basically, I keep posting trade alerts all the time and when you use up 30% of your portfolio, you stop putting on any new trades. When you start with $2500 as an example, 3 trades risking $250 each will use up $750 (i.e 30%) of your account. After that you need to wait to close those positions before repeating the cycle again. For larger accounts, you would simply add more contracts to achieve the same.

      Reply
  12. Dan Lu

    For a beginner with limited capacity to shorting or other strategies such as vertical spread, is it still A good time to join and fully utilize your trade alerts?

    Reply
    • Nishant

      Yes, I don’t do day trading. All my trades have 30 days expiration cycles and I promote a slow paced trading style which can complement a full time job. You can join anytime with $2500. You can always try it for a month and see it suits your needs. There are no contracts, cancel anytime.

      Reply
  13. Charles Wraight

    I loved your book and am new to options. I plan to follow your trades. I see that the last 25K cycle has finished. Will you still be posting your trades? I just want to confirm this prior to signing up. I figured, by following you and what you do, would be a great way for me to be exposed to options with a limited risk as I learn all about the mechanics, and continue my education. I will be doing this full time. Many thanks, C.

    Reply

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