May 2020: BKNG $1620-$1630 Bull Call Spread

Stock

BKNG

Trade Structure

$1620-$1630 Bull Call Spread

Trade Date

05/29/2020

Price Paid

$500

Expiration Days

07/02/2020

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

As you know I don't trade earnings at all. In fact I try my best to stay away from stocks which have earnings in the next 30 days. But post earnings generates some really good opportunities. Post earnings trades are very different than our regular mean reversion trades. These are actually continuation trades. Since, earnings causes a reset in the stocks price movement and its personality, you have to respect the direction in which earnings sends the stock price and have to find trades in the same direction. If you haven't watched my video on Support & Resistance (https://25koptionschallenge.com/technical-analysis-3-support-resistance-post-earnings-trades/), I talk about post earnings trade in that video in detail. Basically, after earnings you get 1 or 2 opportunities to put on a trade in the original direction of the stocks price movement at earnings. With BKNG, the post earnings reaction was really weird. Basically, there was no movement in the stock for upto 8 days. This was really unusual and confused me. In fact a few members asked me about any BKNG post-earnings trade, but I told them the stock is stuck in a range, so I am not taking any trades. Finally, there was a huge spike 8 days later, which got my radars up and I started following BKNG for a pullback opportunity. It just kept going up and did not give us any opportunity. After hitting $1788, it started pulling back and I started watching it on a daily basis. Notice the red candles becoming smaller and smaller and also look at the yellow support line I have drawn. I was watching the stock to hit that support line and it gave us a beautiful opportunity today.

Trade Selection Criteria

Overall market movement

We got a nice 300 point drop in the DOW today due to the President’s address on the China situation.

No Earnings or Significant News

Earnings were just announced on 5/7 and are behind us

Bollinger Bands outside Keltner Channels

Yes, Bollinger Bands are wildly outside the Keltner Channels

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

BKNG shot up to $1871 right after we put on our trade and our trade was profitable for some time and almost at the verge of closing for a full profit. However, BKNG dropped after that and started testing our strikes, many times dropping as low as $1575. Many of our members were getting nervous about this trade, so had to manage the trade carefully. In the end, with only 2 days remaining I had to close my trade for a $200 profit only. NOTE: I posted many more trades as the stock dropped down all the way to $1560 at times and a lot of our members have $1560-$1570 or $1570-$1580 or other lower spreads expiring on 17th and 24th July

Trade Outcome

PARTIAL WINNER

Profit/Loss

$200

Beginning Account Balance

$4,000

Ending Account Balance

$5000

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