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Nov 2019: AMZN $1800- $1790 Bear Put Spread

Stock

AMZN

Trade Structure

$1800- $1790 Bear Put Spread

Trade Date

11/06/2019

Expiration Days

12/06/2019

Trade Rationale

This is a very interesting trade which appears to violate all the rules that I follow. However, it is not a trade which I took just because I was bored. On Nov 6th 2019, we put on this AMZN $1800-$1790 Bear Put Spread. Even though, AMZN is range-bound, we did this trade to spread out our risk. The markets have been roaring higher and higher and all stocks in my watchlist are over-extended to the upside. AMZN is not showing any strength, even in this crazy bullish market. The reasoning behind this trade is that when the market finally takes a break or pulls back, AMZN should go down with it. We paid $455 for this spread and hope to double our money in the next 30 days.

Trade Selection Criteria

Overall market movement

With S&P 500 making new all time highs, the overall market and practically every stock in my watchlist is making new highs. AMZN is showing no strength even though the market is ripping higher and higher. 

No Earnings or Significant News

Earnings are behind us and were announced on 10/24. There is no significant news or earnings event during our trade cycle.

Bollinger Bands outside Keltner Channels

Bollinger Bands are barely outside Keltner Channels. Normally, I wouldn’t have taken this trade. However, I am making an exception because the overall market is extremely extended to the upside.

RSI Analysis

RSI is flat is not giving us any clear signs.

ADX Analysis

ADX is low at 16, clearly confirming that the stock is range-bound.

Trade Analysis

Although, this was a slightly unconventional trade. But the reasoning and outcome on this trade was spot on. Notice, that the trade went in my direction almost immediately. But then reversed right back up and I gave up my gains. But in the end, I closed it for a nice profit.

Trade Outcome

Winner

Profit/Loss

$357

Beginning Account Balance

$16,100

Ending Account Balance

$18,000

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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