Today’s trade was interesting, a short play on ticker EH (Ehang Holdings). Everything went well, and I made money on the trade, but as always mistakes were made and my trading system could be tightened. Below I describe how the trade happened.
Today i just want to go over a short trade i made this morning. Overall I’m super happy with it, but as always there is room for improvement.
The stock was Ehang Holdings (Ticker: EH on NASDAQ).
So the night before, I was on Market Chameleon on the after hours trading page, and when I looked at the biggest decliners EH was at the top of the list, if not the top decliner. So i drilled down a little bit and I found a negative news catalyst which was basically poor quarterly results and poor forward guidance. Ehang makes drones, but are still not sure when they will be ready for market.
Then, when I woke up this morning, as I always do, I went to Market Chameleon again, however this time on the pre-market trading report. It was interesting to see that EH was no longer in the decliners list. This was a big lesson for me, as now I know that it is worthwhile the night before to check out the lists and take a snapshot of the decliners in case they drop off but are likely to still sell off. It appears that the stock recovered just enough to kind of falloff that declines list, but was still primed for a sell off.
A few minutes before market open, I was still interested in shorting EH, so checked out the option prices for PUT options. I bought a 17.5 strike that expired in 7 days.
Truth be told another mistake, as I didn’t really look at the spread closely and it was super wide – so again I paid quite a bit for the options and they started in the red.
However, lucky for me my thesis was right so on the chart, you can see the green entry point and the red exit indicator.
For better or worse, I was trading primarily the one minute chart and you can see i jumped in a little bit early so a bit of risk there that I assumed.
Perhaps in the future i should kind of waited to see what the 5m opening range candle told me, but anyway it worked out and it just tanked at the open and again.
I kind of learned my lesson from my yesterday’s BYSI trade yesterday and that was not to sell emotionally when i saw my P/L turn green but rather hold out as long as i could – waiting for the charts to signal an exit opportunity.
Perhaps another mistake i made is i kind of stuck on the one minute chart whereas if i’d switch to the two minute, maybe i would have held on a bit longer still. Perhaps I should have been on the the five minute chart which i have here:
So from the 5m, so you can see II left a little bit on the table again.
Something worth noting too was the NASDAQ was also dropping today.
The NASDAQ decline was encouraging too, as that gave me an extra layer of confidence to short.
Anyway, while to options had more profit after I sold, I seem to have captured most of the move, so I’m happy.
I held for a bit longer today and really looked at the chart, but should have checked longer time frames. This option might do even better over the next few days.
Stock: EH
Trade: Short via PUTS.