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OCT 2020: NFLX $480 – $485 Bull Call Spread

Stock

NFLX

Trade Structure

$480- $485 Call Spread

Trade Date

10/22/2020

Price Paid

$250

Expiration Days

11/27/2020

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

NFLX is a solid company. But earnings disappointment dropped the stock like a rock from $572 all the way to $480. At this point my mean reversion mentality kicks in. If you look at the 2 support lines I have drawn, we have support at $483 and another one at $466. By the time NFLX dropped to $484, the nasty red candles had transitioned into a DOJI indicating that the downward momentum is losing steam. I had to make a decision based on my familiarity with NFLX and the fact that the downward momentum was dying down to put on this trade. Of course, with the stock market, there are no guarantees, so you have to use your best judgement based on the data currently available to you.

Trade Selection Criteria

Overall market movement

This is a post-earnings trade. My usual mean reversion parameters don’t apply here. These trades are based on Support/Resistance only

N/A

No Earnings or Significant News

Earnings were announced on 10/20 and are behind us.

Bollinger Bands outside Keltner Channels

This is a post earnings trade – our regular mean reversion indicators don’t apply here.

N/A

RSI Analysis

This is a post earnings trade – our regular mean reversion indicators don’t apply here.

N/A

ADX Analysis

This is a post earnings trade – our regular mean reversion indicators don’t apply here.

N/A

Trade Analysis

NFLX got stuck in a squeeze (or Consolidation phase) and whipsawed all througout our this trade. I had to literally wait until the last day of the expiration cycle to close it at a profit. If you are a paid member, you must know that I dislike holding trades so close to expiration, but sometimes you have to deal with this scenarios.

Trade Outcome

WINNER

Profit/Loss

$225

Beginning Account Balance

$7,585

Ending Account Balance

$8100

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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