The August 11 setup on Wayfair Inc (W) was based on a classic bearish engulfing pattern printed on August 7, with RSI deep in overbought territory. The initial read was for limited upside and a stall below the $80 level.
While the early part of the week confirmed the reversal with some downside follow-through, buyers proved resilient. By mid-week, W rallied sharply, testing my comfort zone and pushing within striking distance of the short call.
Rather than hold into the final hours of expiration and risk a squeeze through $80, I chose to close the position late on Friday, locking in a 33% profit. The decision was driven by the balance of the small remaining potential gain versus the substantial open risk if the stock moved in-the-money.
Trade Recap
Structure: Bear Call Spread
Expiration: Aug 15, 2025
Short Call: 80 (10 delta)
Long Call: 84
Contracts: 19
Credit Received: $0.21 per contract
Total Credit at close: $133
Broker Fees: –$22.88
Net P/L: +$110
👉 View on OptionStrat
👉 View in Trade Log
Post-mortem
The bearish engulfing on August 7 provided a clean short-term signal, but the broader trend in W remained strongly bullish. Buyers quickly absorbed selling pressure and kept price elevated near resistance.
By Friday, with only a small portion of premium left to collect and the stock trading within less than a dollar of the short strike, the risk/reward skewed heavily toward risk. Exiting early preserved profit and avoided the binary outcome of holding through expiration in such close proximity to resistance.
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Disclaimer
All content is for informational purposes only and does not constitute financial advice.Any trades or strategies should be tested in a simulated environment before use.Trading involves risk, and all decisions are the sole responsibility of the reader.