Trade Management starring Nordstrom

One of the normal realities in trading is the fact that not every trade can “work”. All a trader can do is execute a trade based on their Trading Process and manage the outcome. For traders that venture into Earnings trades, this is especially true since a post-Earnings reaction can often be out-sized and/or wild.

The overall success in your Trading will come down to how well you design trades – design trades to accommodate as many scenarios for price as possible while still being in a position to participate in a price move.

I have a trade on in $JWN and it will not make any additional money for me. Here are the specifics:

  • Long the August 70/72.5 1×2 Call Ratio
  • Short the August 62.5 Puts
  • This was done for a $.10 debit
  • This trade takes margin (at least until the uncovered short pieces are closed)

This is a current Daily chart:

JWN_post_Earnings

An Inverted Hammer has formed (a trend reversal signal, needs confirmation on Monday). Here is what happened to the Options:

JWN

If a trade is not going to work in your favor (provide more profits, move in the desired direction) then this is the ideal outcome. Poof at expiration.

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