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JUN 2021: MMM $190 – $195 Bull Call Spread

Stock

MMM

Trade Structure

$190- $195 Call Spread

Trade Date

06/24/2021

Price Paid

$250

Expiration Days

7/30/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

Here is a simple mean reversion trade. The chart is not a perfect text book trade, but those perfect setups are rare anyway. That is where judgement/experience comes into play. Most of the mean-reversion indicators are all in place. DI- had started turning down starting 6/18 and RSI also bounced back up after being in oversold territory. As far as the price action is concerned, the downward momentum seems to have stopped and the stock is now going sideways with intermittent green days showing up every now and then since 6/18.

Trade Selection Criteria

Overall market movement

May sell-off is behind us and markets are in decent shape. There is no exaggerated movement in the overall markets and this trade is based on purely this stocks own movement. 

N/A

No Earnings or Significant News

Earnings are behind us and were announced on 4/27

Bollinger Bands outside Keltner Channels

Bollinger bands are clearly outside Keltner Channels.

RSI Analysis

RSI is popping up after being in oversold zone

ADX Analysis

DI- and DI+ are both agreeing as pointed in the chart above.

Trade Analysis

MMM languished around in a trading range throughout this trade, so had to wait almost 2 days before expiration to close this for 94% ROI. If the stock takes in your direction immediately, then you can close these trades in as early as 10-14 days. In the end, profit is profit!

Trade Outcome

WINNER

Profit/Loss

$235

Beginning Account Balance

$14,500

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

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