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SEP 2020: W $280 – $285 Bull Call Spread

Stock

W

Trade Structure

$280- $285 Bull Call Spread

Trade Date

08/24/2020

Price Paid

$250

Expiration Days

10/02/2020

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

W was trading at $280 before earnings. After great earnings, the shot spiked up to new highs and never really gave us a chance to get into a trade on a pullback. Finally on 9/3, we got a nice pullback to pre-earnings level which allowed me to get into this trade. I am risking $250 in this trade to make a potential $250 if W stays above $285 by expiration.

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 are behind us and were announced on 08/05

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

After putting on this trade, W kept dropping like a rock as we are right in the middle of a massive 14% correction in Nasdaq. It fell all the way down to $234. It then slowly crawled out of the lows and by expiration had crossed our short strike. This allowed us to close it for our full profit target. If you had bought a call instead, time decay would have eaten away on your Call option for the next 20 days causing huge losses to show in your account.

Trade Outcome

WINNER

Profit/Loss

$235

Beginning Account Balance

$6,700

Ending Account Balance

$5,900

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