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NOV 2020: ETSY $120 – $125 Bull Call Spread

Stock

ETSY

Trade Structure

$120-$125 Call Spread

Trade Date

11/09/2020

Price Paid

$250

Expiration Days

12/18/2020

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

ETSY initially shot up to $145 after an earnings beat. However, due to the rotation out of the tech sector every single tech stock in Nasdaq is currently under pressure. Etsy dropped down to $120 which is a well established support level, causing me to take this trade. In addition to a well-established support level, the DI- indicator is also showing that the downward pressure may have fizzled out at this point.

Trade Selection Criteria

Overall market movement

Nasdaq has been under pressure for last 2 days causing a massive sell-off in all tech stocks

No Earnings or Significant News

Earnings are behind us and were announced on 10/28

Bollinger Bands outside Keltner Channels

Bollinger bands are clearly outside the Keltner Channels.

RSI Analysis

RSI is flattening out indicating the downward pressure may have slowed down. However, it is still inconclusive.

N/A

ADX Analysis

DI- is clearly pointing down indicating that the downward pressure on Etsy is at its end.

Trade Analysis

ETSY took off like a rocket after we put on this trade. It is impossible to pick bottoms, but in this case we literally picked the bottom. The trade closed in 20 days for a full 94% profit.

Trade Outcome

WINNER

Profit/Loss

$235

Beginning Account Balance

$7,700

Ending Account Balance

$8200

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