Friday, March 12, 2010

RIMM long via spread

Date entry: 12-MAR-10

Trade: Long RIMM with a debit spread Apr 2010 $75/70 Bull Call spread - 5 contracts at $3 each

Set-up:  11-Mar-10 accel band set up confirmed on daily chart. %R has confirmed and had 2 retests prior to the accel band set up.

Conditions: Efficiency Ratio, Stochastics, ADX/DMI are all very bullish..

Re-Entry: none.

Exit strategy: 73.85 is violated on daily chart.

Target for profit taking: Sell entire position at $750 profit.

Stop loss: close below $73.85 (accel band set up bar's low).

Time Frame: Prepared holding through April 2010 Expiration.

Where found: Just checking into RIMM


I am actually quite confident in this trade. It is a well crafted trade. The breakeven point at expiration is lower than the current stop in place based on Accel band setup. The trend has been in place on %R for a little while now and it has just confirmed an acceleration of that trend. There is a gap from September where the target for RIMM filling that gap is $82.72.

I crafted this as a spread because implied volatility is high on RIMM right now and I wanted a cheaper way to go long. This is a 3:2 risk vs. reward scenario and I am protected on my top strike as RIMM is currently above $75...but I am further protected because of my breakeven point at expiration is lower than my current stop.

The stock gave me a good entry on the hourly chart because it had a %R retest, so I was using that as a guide.

In the retirement accounts I went long some calls based on this acceleration. Those are being guided by the daily chart and they are following standard exit rules based on %R stop loss or the current stop whichever comes first.

Daily and Hourly Charts below.