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May 2020: AMZN $2315 – $2320 Bull Call Spread

Stock

AMZN

Trade Structure

$2315 - $2320 Bull Call Spread

Trade Date

05/01/2020

Price Paid

$233

Expiration Days

06/05/2020

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

May 2020: AMZN $2315 - $2320 Bull Call Spread. This is a post earnings trade. Although, AMZN has done really well during the pandemic due to increased online shopping demand and actually beat Wall Street's revenue estimates, Jeff Bezos announced that they will use their entire profits of $4 Billion from this quarter on Coronavirus response. This caused it to drop from a high of $2475 a few days ago all the way down to $2285. In my opinion, the 8% drop we saw on Friday is an exaggerated response from Wall Street and this definitely caught my mean reversion radar. With earnings trades, my regular mean reversion indicators don't apply, so you have to use some judgement. You will notice that I did not use my indicators to put on this trade. Also, notice that we had a big down day where DOW dropped 622 points taking AMZN down all the way to $2285, so we got in a little prematurely, but we have 35 days for this to play out. If AMZN expires above $2320 in 35 days, we will almost double our money (target profit = $228)

Trade Selection Criteria

Overall market movement

We are experiencing unprecedented volatility in the markets due to the ongoing Coronavirus scare. We put on this trade when DOW dropped 622 points on Friday.

No Earnings or Significant News

Earnings were just announced on 4/30 and are behind us

Bollinger Bands outside Keltner Channels

N/A – For post earnings trade my regular indicators don’t apply.

RSI Analysis

N/A – For post earnings trade my regular indicators don’t apply.

ADX Analysis

N/A – For post earnings trade my regular indicators don’t apply.

Trade Analysis

This trade worked out picture perfect and gave us a ROI of 109% in 31 days.

Trade Outcome

WINNER

Profit/Loss

$254

Beginning Account Balance

$3,200

Ending Account Balance

$4200

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

1 Comment

  1. Derek R

    Hey…AMZN earnings came in at $5.01, as opposed to the $6.36 forecast by analysts, so I’m not sure how that can be said to have beaten wall street’s estimates. I guess that’s why AMZN had a near $200 tumble the following day.

    Reply

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