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July 2020: BIDU $120 – $125 Bull Call Spread

Stock

BIDU

Trade Structure

$120 - $125 Bull Call Spread

Trade Date

07/14/2020

Price Paid

$250

Expiration Days

08/14/2020

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

This is not our first stint with BIDU. We had some profitable trade on it in the past. The rationale is the same as with other trades in this round like CRM, A above, so I will not repeat myself.

Trade Selection Criteria

Overall market movement

The market has been going up non-stop for 10 days, and we got a quick pullback today, when DOW dropped more than 300 points today.

No Earnings or Significant News

Earnings are behind us and were announced on 5/18

Bollinger Bands outside Keltner Channels

Bollinger Bands are outside Keltner Chanels. 

RSI Analysis

RSI is smack in the middle (i.e not oversold or overbought)

ADX Analysis

ADX is pointing down and below 25, indicating that the downward pressure is not sustainable.

Trade Analysis

BIDU had an original earnings date of 8/17. That is why I chose 8/14 expiration for this trade to avoid earnings. However, they changed their earnings date to 8/13 which forced us to close this trade out earlier for a mere $15 profit. Otherwise, this would have been a fully profitable trade. Also, notice what happened after earnings. That is why I don't trade earnings because of the gambling nature of earnings. The stock can go either way once the earnings announcement is made. In our case, we would have lose all our money if we had held on.

Trade Outcome

SCRATCH

Profit/Loss

$15

Beginning Account Balance

$5,400

Ending Account Balance

$6200

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

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