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OCT 2020: OKTA $215- $220 Bull Call Spread

Stock

OKTA

Trade Structure

$215- $220 Call Spread

Trade Date

10/23/2020

Price Paid

$250

Expiration Days

11/27/2020

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

This one is a plain-vanilla mean reversion trade. The ones you must have read in the first edition of my book. The rationale is simple, OKTA gave up its earlier gains from this month and dropped all the way to $216. Given that the next support is at $210 level, I put on this trade after noticing that the DI- has flattened out indicating that the downward momentum has lost steam. RSI, although not conclusive is beginning to turn back up and the nasty long red candles have shrunk down in size, giving way to our first green DOJIsh candle.

Trade Selection Criteria

Overall market movement

The markets have been under pressure due to rising COVID cases and elections right around the corner.

N/A

No Earnings or Significant News

Earnings are coming up on 12/04, so don’t coincide with our expiration date

Bollinger Bands outside Keltner Channels

Bollinger Bands are way outside the Keltner Channels

RSI Analysis

Although, not conclusive, RSI is beginning to turn upwards.

ADX Analysis

DI- has flattened out indicating that the downward momentum may have lost steam.

Trade Analysis

After putting on this trade, OKTA kept falling and for next 20 days we were showing losses. But it eventually went back up and we made our full profit. This is just how mean reversion trading works. You can't pick bottoms, so after putting on my trades the stocks usually go against me for a few days before finally heading in my direction. In the end, we still got our prize!

Trade Outcome

WINNER

Profit/Loss

$235

Beginning Account Balance

$7,585

Ending Account Balance

$8200

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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