Trading this software stock after a recent sell-off using options

CNBC

6 days ago

Sometimes the market just flat-out overreacts — and if you've got the right tools and mindset, those overreactions can turn into serious opportunities. That's where mean reversion comes in. It's all about stepping in after the panic, not during it — betting that things will snap back to equilibrium. Now, pair that with a strategic use of options, and you've got a disciplined way to profit from these snapbacks without taking on wild risk. I lay out the full framework for this style of trading in my book Mean Reversion Trading , and there are tons of live trade examples on my site . One name catching my attention right now is Autodesk (ADSK) . The stock dropped a brutal 12% in just four days starting July 8 — all because of speculation it might acquire PTC, a rival in the industry. That news triggered a sharp sell-off — the textbook kind of move we look for as mean reversion traders. Then came the twist: on Monday, Autodesk filed a business update with the Securities and Exchange Commission that all but shut down the idea of a big acquisition. The stock bounced immediately, but the full recovery hasn't happened yet — and that creates an opening for a smart, well-timed entry. Even though this setup stands strong on its own, I still like to check the RSI (relative strength index) for an extra layer of confidence. RSI is a classic momentum gauge. When it dips below 30, the stock is considered oversold — but the real signal comes when it starts climbing back out. In ADSK's case, RSI just popped off that oversold level, giving us a potential green light that momentum is shifting back to the upside. The trade setup: ADSK 295-300 bull call spread I'm approaching this mean reversion setup in ADSK using a bull call spread — a simple yet effective options strategy that limits downside risk while still offering solid return potential. The beauty of this setup is how flexible and capital-efficient it is: you can get positioned for around $250 and easily scale it up by adding contracts as the trade progresses. To put it in perspective — 10 spreads would cost about $2,500, with the potential to double that if ADSK closes at or above $300 by expiration. If the stock dips a bit more and drops below $295, there's a higher risk/reward opportunity by shifting the structure slightly and opening a $290–$295 call spread to take advantage of the lower entry point. Here is my exact trade setup: Buy $295 call, Aug 8 expiry Sell $300 call, Aug 8 expiry Cost: $250 Potential Profit: $250 -Nishant Pant Founder: https://tradingextremes.com Author: Mean Reversion Trading Youtube, Twitter: @TheMeanTrader DISCLOSURES: Nishant has a 295/300 bull call spread on ADSK, expiring on Aug. 8. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.