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MAR 2021: TSLA $610 – $620 Bull Call Spread

Stock

TSLA

Trade Structure

$610- $620 Call Spread

Trade Date

3/4/2021

Price Paid

$500

Expiration Days

04/16/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

I have hardly been trading TSLA this year. For my trading style, I need stocks which have well established trading patterns. But TSLA is such a cult stock, all it does is go up. In addition to that, it is a huge mover. It can go up or down $150 in a day on literally no material news. (Maybe tweets hold more value than material news these days. The CEO of a company is buying Twitter founder Jack Dorsey’s first tweet for $2.5 million!) But due to this broader sell-off in the market, TSLA got pulled back with every single stock in our watchlist. I entered this trade based on the support which lies around $600ish. TSLA did drop down to the $500s after that, but is again flirting with $600 levels at this point. Overall, whether you got in at $575 or $610, it doesn’t matter. If we get a recovery in the market, TSLA will be trading above $700 in a matter of 7-10 days.

Trade Selection Criteria

Overall market movement

Nasdaq in 12% correction. Every single stock in Nasdaq was dragged down brutally during these period. These sell-offs generate amazing trading opportunities.

No Earnings or Significant News

Earnings are past us and were announced on 1/27

Bollinger Bands outside Keltner Channels

Bollinger bands are clearly outside the Keltner Channels.

RSI Analysis

RIS in oversold territory but no conclusive

N/A

ADX Analysis

DI+ is sharply turning upwards indicating the downward momentum is coming to an end.

Trade Analysis

TSLA was caught in the 12% Nasdaq correction and kept dropping after I put on this trade. This is expected as Mean Reversion Trading does not attempt to catch the bottoms. We just need to be "right enough" about our directional bias to make these trades profitable. In the end we did close this trade for a 94% ROI on money invested.

Trade Outcome

WINNER

Profit/Loss

$450

Beginning Account Balance

$11,500

Ending Account Balance

$11,100

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

2 Comments

  1. Nitin

    Please update the 2nd chart.

    Reply
    • Nishant

      Thanks. This is fixed.

      Reply

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