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MAR 2021: SQ $240 – $245 Bull Call Spread

Stock

SQ

Trade Structure

$240 - $245 Call Spread

Trade Date

2/24/2021

Price Paid

$250

Expiration Days

04/01/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

SQ initially shot up from $247 to $261 on an earnings beat. However, it got dragged down with the market in the subsequent days. I took this trade on a support level which exists around $242ish. But the stock continued to fall after that giving many of our traders better entry points. If you missed this trade, it can be a good trade for next week.

Trade Selection Criteria

Overall market movement

N/A – This is a post earnings trade. Overall market movements are not as applicable as they are to our regular mean reversion trades

N/A

No Earnings or Significant News

This is a post earnings trade. Earnings were just announced on 2/23

Bollinger Bands outside Keltner Channels

Bollinger bands are clearly outside the Keltner Channels.

RSI Analysis

RSI is turning up

ADX Analysis

DI- although flat is now turning down.

Trade Analysis

SQ got brutally dragged down by the broader market sell off and although it almost recovered by 4/1 but not enough for us to recover my money on this trade. There are no guarantees in the stock market and deep corrections and pullbacks are part of the market cycles. The risk management and capital allocation rules that I teach our private members (also mentioned in my book) is what will save you from these corrections.

Trade Outcome

LOSER

Profit/Loss

$-250

Beginning Account Balance

$13,500

Ending Account Balance

$10,100

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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