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JUL 2021: ZM $400 – $395 Bear Put Spread

Stock

ZM

Trade Structure

$400- $395 Put Spread

Trade Date

07/07/2021

Price Paid

$250

Expiration Days

7/7/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

PUT spreads are very hard to trade in Bullish markets. Plus, these are short term (2 week) trades with low success rates. You have to be very diligent in making sure when to take these trades on. I usually wait for confirmation from many of my indicators before taking the trade and use a lot of judgement, but even then the short term trend can go against me and destroy the trade. In ZM’s case, all mean reversion indicators as shown below are lining up and ZM did take a beating and looks like a winner at this time. However, if we get green markets next week, this could pop right back up, so we will need to keep a close eye on it.

Trade Selection Criteria

Overall market movement

Markets have gone parabolic and I took this trade based on extreme highs in literally all the stocks in our watchlist.

No Earnings or Significant News

Earnings are behind us and were announced on 6/1

Bollinger Bands outside Keltner Channels

Bollinger bands are clearly outside Keltner Channels.

RSI Analysis

RSI turning down after being in overbought zone

ADX Analysis

DI+ is sharply turning down indicating a temporary loss of upward momentum

Trade Analysis

Although, it is virtually impossible to catch the top and bottom of a trading range, but in this case we did. And the spread closed for 94% ROI in a matter of 8 days. Who doesn't love quick winners!

Trade Outcome

WINNER

Profit/Loss

$235

Beginning Account Balance

$15,400

Ending Account Balance

$15,400

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. Fernando Franco

    Hi,
    How could I get the trial week offer??

    Reply

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