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JUL 2021: UPS $190- $195 Bull Call Spread

Stock

UPS

Trade Structure

$190- $195 Call Spread

Trade Date

07/27/2021

Price Paid

$250

Expiration Days

8/27/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

Another good earnings, followed by profit taking. I took this trade based on the support level at $195. There is a gap down below at $175 though, but just because there is a gap doesn’t mean it will fill. Plus, UPS had good earnings and RSI is already in the oversold zone. Unless a broader market sell-off ensues, UPS should start turning back in the next few days.

Trade Selection Criteria

Overall market movement

This was a post-earnings trade. The individual stock’s price/action overrides overall market movements for these types of trades.

N/A

No Earnings or Significant News

Post earnings trade taken on the next day of earnings. 

Bollinger Bands outside Keltner Channels

Bollinger bands are clearly outside Keltner Channels.

RSI Analysis

Although, most post-earnings trades disregard mean reversion indicators like RSI/ADX, in this case RSI is in oversold zone which could result in a bounce

ADX Analysis

Post earnings trade mostly disregard mean-reversion indicators. 

N/A

Trade Analysis

UPS got stuck in a sideways consolidation, also known as a "squeeze" right after putting on this trade and literally did not budge the entire month. I was forced to close this trade on the last day of expiration for a meager 11% ROI

Trade Outcome

PART WINNER

Profit/Loss

$30

Beginning Account Balance

$15,700

Ending Account Balance

$16,600

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. Paolo Foti

    “UPS had good earnings”…. this sentence is based on what? Clearly it’s NOT based on Price Action (because price had a gap down of -more or less- 12 points), so WHO told this?

    … and then: what about yours’Book rule:

    “with earnings you have to respect the direction of the initial spike. If it is a huge up or down move, it has happened for a reason as the market digests the earnings numbers.”

    Following this rule, It was supposed to open a Bear PUT just to “respect the huge down move” instead of a Bull CALL.
    Thanks in adavance for your explications.

    Reply
    • Nishant

      Paolo great question. I am a mean-reversion trader. Which means I keep the dominant trend of the stock market (bullish right now) and go against the short term exaggerated market reactions or pullbacks. I do a ton of trades like these in our private group with 1200+ traders on a daily basis but it is not possible to cover every single trade setup in the book. That is why you will sometimes see trades show up here which are not mentioned in the book.

      Put spreads have horrible win ratio these last 2 years so I am almost exclusively trading call spreads as of now.

      Reply

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