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JAN 2021: IBM $115 – $120 Bull Call Spread

Stock

IBM

Trade Structure

$115- $120 Call Spread

Trade Date

1/22/2020

Price Paid

$250

Expiration Days

02/26/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

Trades were hard to come by this week as markets have been raging and going up constantly. I thought we would get a nice pullback today, but it was hardly anything. Regardless, we were able to get in on at least our 2nd post-earnings trade. (BLK was the previous one) IBM disappointed Wall Street with a revenue miss in its AI and Cloud division which their CEO has been touting as the next big thing. This is my personal opinion but this level of an extreme reaction is a little uncalled for. Leaving my opinion aside, let us look at the technicals. Look at that red candle today. If it was a massive red candle filled from top to bottom, I would have waited a couple more days to see how this shapes up, but the fact that seller’s lost some control during the day as seen by the shrinking candle is a positive clue. In addition to that there is support at 115 and around 110 levels. If Nasdaq pulls back next week for some reason, that could take IBM down to next support of 110 which will give more buying opportunities if you missed today’s trade. But if markets stay the way they are, it appears the stock is going to bounce from here. I have mentioned Candlesticks in this video: https://25koptionschallenge.com/technical-analysis-3-support-resistance-post-earnings-trades/ But there are many videos on youtube which can explain you how to properly make sense of a Candle.

Trade Selection Criteria

Overall market movement

N/A Post-earnings trades are very different. We rely on the stock’s price movement rather than the overall Market.

N/A

No Earnings or Significant News

This is a post earnings trades. We find these trade setups right after earnings are announced.

Bollinger Bands outside Keltner Channels

Bollinger bands are clearly outside the Keltner Channels.

RSI Analysis

N/A Post-earnings trades are done based on Support/Resistance as all other indicators are lagging indicators and they take time to catch up to the sudden knee jerk Earnings reaction.

N/A

ADX Analysis

N/A Post-earnings trades are done based on Support/Resistance as all other indicators are lagging indicators and they take time to catch up to the sudden knee jerk Earnings reaction.

N/A

Trade Analysis

Not much to say here. Look at the chart, IBM just took off in our direction right after putting on this trade. We were able to close this trade for our full profit target with 17 days still remaining in the expiration cycle!

Trade Outcome

WINNER

Profit/Loss

$235

Beginning Account Balance

$10,770

Ending Account Balance

$12200

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. Bill Khaira

    Is this a closing trade or opening trade?
    Still plenty of days left in the trade and it has not reached it’s full profit or 50% loss.
    I am a paid member now.

    Reply
    • Nishant

      These emails are meant for our free members. They are delayed trades. If you are paid members, please unsubscribe to these emails or ignore them.

      Reply

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