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Sep 2019: AMZN $1735- $1755 Bull Call Spread

Stock

AMZN

Trade Structure

$1735-$1755 Bull Call Spread

Trade Date

09/26/2019

Expiration Days

10/18/2019

Trade Rationale

AMZN is mostly range bound and is bouncing back and forth between the Keltner Channels. Trying out this bull call spread and will likely close it as soon as I see any decent profit. This is a departure from my typical trades where I want to make sure that the Bollinger Bands are way outside the Keltner Channels. With such range bound trades, closing the trade when you achieve a profit of 50%-70% of your target max profit is a good idea.

Trade Selection Criteria

Overall market movement

SPY pulled back from its all time high of 302 to 294 but is showing signs of going back up again. Overall a range bound market

No Earnings or Significant News

Earnings are behind us and the next earnings will be after our expiration cycle. 

Bollinger Bands outside Keltner Channels

Bollinger Bands are outside Keltner Channels. However, they are not as extended as I usually like them to be. AMZN is pretty much range-bound here.

RSI Analysis

RSI is in oversold territory, however not showing any clear signs of trend reversal.

ADX Analysis

ADX is weak and indicates that there is no trend in place.

Trade Analysis

As expected, AMZN hardly experienced any movement during our trading window. In fact, it initially went down and we were showing losses. But then it bounced back up and although it was hardly above our short strike. (Amzn was at $1765) we were still able to close the position for a handsome profit. That is the beauty of debit spreads. If you had bought a call instead of a call spread, the whipsawing market would have caused you to have a loss due to Theta or Time Decay eating into your position.

Trade Outcome

Winner

Profit/Loss

$589

Beginning Account Balance

$9395

Ending Account Balance

$15,000

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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