Hey 5-Star Trader,
“Tuesday Trade” Journal: One of the most important concepts in trading is to review your work, and learn from the good and the bad. Identifying what is working is critical — to do more of it. So, to lead by example, each Tuesday, you’ll get a trade from my trading journal, in which I explain my thought process from start to finish. Trading is all about finding something that works, and applying it over and over again. That’s how you find trading success. So study up on this “Tuesday Trade” and let’s get to work.
For this week’s “Tuesday Trade,” I want to outline my trade in Facebook (FB).
Facebook is a large-cap stock that can have a huge influence over the health of the market so I always like to keep it on my radar. Near the end of August, I saw FB pulling back to the 50 simple moving average (SMA) and was bouncing at that key level along with multi-time frame squeezes. At the same time, I noticed that it had dipped below its recent all time high (ATH) price.
So with that in mind, I decided to go in and buy one butterfly — BUY +1 BUTTERFLY FB 100 (Weeklys) 10 SEP 21 360/380/400 CALL @6.14 (limit order) LMT. I was expecting Facebook to return (and beat) its previous ATH so I set my target at $380.
My overall risk was approximately 2% and this contract was bullish in nature.
Pictured below is my butterfly entry in Facebook.
The very next day FB was coming up against some resistance at $365. However, I still had plenty of days to expiration (DTE) that I felt comfortable with giving it time to run.
Fast forward to one week after I opened my contract and FB behaved exactly the way I wanted. I was able to sell my butterfly just shy of $380, which made my profit nearly double — SELL -1 BUTTERFLY FB 100 (Weeklys) 10 SEP 21 360/380/400 CALL @11.41 LMT.