May 2020: SPOT $145 – $150 Bull Call Spread

Stock

SPOT

Trade Structure

$145 - $150 Bull Call Spread

Trade Date

0/29/2020

Price Paid

$265

Expiration Days

06/05/2020

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

May 2020: SPOT $145 - $150 Bull Call Spread. This is a post earnings trade. Earnings cause a reset in a stocks personality and momentum, due to the nature of it being a binary event. So, post earnings trades for me are almost always continuation trades instead of the usual mean reversion trades. Spotify announced stellar earnings. Their 1st quarter reveneue surged 22%, they are the one of the few companies which is actually enjoying a virus surge right now. After shooting to $163 post-earnings, SPOT is experiencing a little pullback. In my opinion this is a golden opportunity and I feel most confident about this trade in this round of trades.

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 we saw a pullback in the market and SPOT.

No Earnings or Significant News

Earnings were just announced on 4/29 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

Needless to say, this was a picture perfect trade. It returned us 83% ROI 20 short days. With debit spreads, you usually have to wait for the last 7-10 days of expiration to yield full profit. But in this case, SPOT shot off to the moon allowing us to close the trades 15 days early.

Trade Outcome

WINNER (83% profit)

Profit/Loss

$225

Beginning Account Balance

$3,200

Ending Account Balance

$4000

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