After an extended run higher, Wayfair Inc (W) printed a textbook bearish engulfing candle on Thursday, August 7 — fully consuming the prior day’s bullish bar. Friday confirmed the reversal with further downside, and today’s early session bounce offered an ideal entry for a tactical call credit spread.
RSI, which hit 82 last Thursday, has eased to around 70 but remains in overbought territory — reinforcing the case for limited upside in the near term.
📉 Overbought conditions. Clear reversal signal.
Setup Selection
With the engulfing pattern confirmed and short-term momentum rolling over, W fit the criteria for a high-probability 10-delta bear call spread — placed well above recent swing highs.
Implied volatility was favorable, and premium levels offered an attractive reward-to-risk profile without requiring a sharp sell-off. The setup simply relies on price staying capped below resistance while theta decay works in our favor.
Why Bear Call Spread?
→ Defined risk.
→ Strong reward-to-risk.
→ No need for major downside — just hold below resistance.
The structure benefits from stalled buying pressure and sideways-to-lower price action.
Trade Structure
After modeling several variants, this configuration offered the best balance of credit received and strike placement:
Expiration: August 15, 2025
Short Call: 80
Long Call: 84
Contracts: 19
Credit Received: $0.21 per contract
Target Profit (net before fees): $399
👉 View on OptionStrat
👉 View in Trade Log
Entry and Exit Plan
Position opened Monday morning, August 11, on an intraday pop into resistance.
→ If W stays under 80 and we capture most of the premium before Friday, I’ll close early. No reason to wait for expiration.
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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.