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Sep 2021: FIVE $185 – $190 Bull Call Spread

Stock

FIVE

Trade Structure

$185-$190 Call Spread

Trade Date

9/3/2021

Price Paid

$250

Expiration Days

10/01/2021

THIS IS A DELAYED TRADE FOR EDUCATIONAL PURPOSES ONLY.

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Trade Rationale

FIVE beat on eps estimates but was slightly below revenue estimates. They also refused to give full year guidance due to COVID uncertainty. This caused a massive and uncalled for drop in the price. Extreme market reactions mean opportunities for me. I waited for the price to stabilize and got in on the next day when I saw the first green bar followed by other indicators confirming my directional bias.

Trade Selection Criteria

Overall market movement

This was a post earnings trade. I don’t pay as much attention to the overall market as the individual stock’s price movement becomes more important for these trades

N/A

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

RSI is turning up after the recent sell off

ADX Analysis

DI- is turning down.

Trade Analysis

One of the victims of SeptemBEAR! FIVE got pulled back by the correction and this trade became a loser. Look what happened just a few days later. Such is trading life. Your goal should be to have winners >= losers not all winners.

Trade Outcome

LOSER

Profit/Loss

$-250

Beginning Account Balance

$16,300

Ending Account Balance

$16,300

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. Barnard T Griffith

    Thought provoking, I have an idea that less risk trades. Do you use OCO orders? Such as: $1.25 stop limit credit or $4.85 limit credit or better?

    Reply
    • Nishant

      It is not possible to do stop loss orders on spreads. No trading platform is able to calculate the price of a spread correctly, so if you try a stop limit/loss order you will find that your trades get closed out prematurely for a loss even if they were profitable.

      Reply

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