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Oct 2021: OKTA $230 – $235 Bull Call Spread

Stock

OKTA

Trade Structure

$230-$235 Call Spread

Trade Date

10/08/2021

Price Paid

$250

Expiration Days

11/05/2021

5 weeks with 100% winning trades is not realistic!

We have enjoyed a really nice 5 weeks so far where we literally had 100% winners every week. But to expect this to continue in the future is unrealistic. Although this rally has some serious legs, we will soon start getting into a phase where things will normalize. i.e we will have some winners and some losers in each expiration. This famous quote from Peter Lynch comes to mind – “In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten” This is the point where discipline will come back into play and here are some key points to keep in mind:

  1. Drop allocations and market exposure while continuing to benefit from this rally. 15% – 25% is a perfectly fine allocation as it is high enough to make decent gains from this rally. But it is still a safe place to be if we get a pullback.
  2. Don’t keep allocations too low. Anything below 15% will make your account stagnant. You will see everybody around you high fiving their victories and you will eventually end up FOMOing into trades at the worst possible time. It is important to keep a decent allocation so you keep making gains when markets are rallying.
  3. As we go into a phase where we will have a mix of winners and losers, sticking to the 50% loss rule becomes important again. By closing losers at 50% loss, you can wipe out 2 losers with 1 winning trade.

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

As we were coming out of the September correction, I started taking a few $1 wide spreads to test the waters. I did try a couple of $5 wide spreads in addition to the $1 wides as well. OKTA is one of them. OKTA enjoys support around the $230 area and I took this trade purely based on that. Friday was a red day and the stock slipped a couple of dollars after that, but next week’s action in the Nasdaq will decide the fate of this trade.

Trade Selection Criteria

Overall market movement

Massive drop in the markets and we are nearing the end of a correction.

No Earnings or Significant News

Earnings were announced on 9/1 and are behind us.

Bollinger Bands outside Keltner Channels

Bollinger bands are clearly outside Keltner Channels

RSI Analysis

Trade was taken purely based on Support/Resistance levels.

N/A

ADX Analysis

Trade was taken purely based on Support/Resistance levels.

N/A

Trade Analysis

After dropping for a couple of days, OKTA turned in my favor with multiple gap-n-go days. We closed out this trade for 94% ROI in 25 days.

Trade Outcome

WINNER

Profit/Loss

$235

Beginning Account Balance

$19,700

Ending Account Balance

$24,000

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

2 Comments

  1. Peter Beddall

    Opening image is of OKA, closing image is of ARKK???

    Reply
    • Nishant

      Thanks. This is fixed now.

      Reply

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