On July 3, 2025, a significant trade involving Cummins Inc. (CMI) caught my attention, a calculated $350/$360 call spread setup, entered at $335.49 per share. With two contracts costing just $3.55 each, this tactic presents a potential maximum profit of $1,290, or a striking 181% return. The trade targets a range of $368 to $381, with a prudent stop at a close below $330, and an undefined expiration reflecting a short- to mid-term outlook. This blog post serves as both an analysis and a trading journal for the trade, diving into the strategy’s mechanics and exploring what makes it a promising move in today’s market landscape. At the foot of this is a Review By my mentor Paul Bratby.
Date: July 3, 2025
Ticker: CMI
Entry Price: $335.49
Strategy: $350/$360 Call Spread (2 contracts)
Cost Basis: $3.55 per contract
Max Profit: $1,290 (181%)
Target Range: $368–$381
Stop: Close below $330
Expiration: TBD implied short- to mid-term swing
📊 Greeks & Risk Profile
- Delta: Moderately positive – directional lean with limited downside
- Gamma: Elevated near strike – could trigger rapid move on breakout
- Theta: Favorable – time decay offset by short leg of spread
- Vega: IV buildup expected into earnings – potential premium expansion
✅ Confluence Confirmation
Technical + Structural + Signal-Based Alignment:
- ✅ 3 Green Dots XBrat Signal:
- Trend, Bias, and Confirmation fully aligned – solid conviction setup
- 📈 Fib Bounce Zone:
- 61.8% retracement held with precision
- 🌀 Bollinger Mid-Band Support:
- Clean bounce, volatility compression prior to expansion
- 📦 Volume Node Shelf:
- Support at $332–$335; acts as demand zone
🌐 Sector & Macro Context
- Machinery Rotation Thesis:
- Sector showing strength within cyclicals – CMI leading components
- Infrastructure & Capex Themes:
- Tailwinds from industrial and AI-linked infrastructure spend
- Macro Catalyst:
- Inflation cooling → margin expansion; earnings on horizon
🧠 Gamma Exposure (GEX) Mapping
- Neutral Zone: $340–$344 – minor chop expected here
- Positive Gamma Shelf: $345–$350 – pull toward target, pinned movement likely
- Downside Risk Zone: Below $330 – gamma support fades, volatility may spike
Post-Trade Analysis: Cummins Inc. (CMI) — $350/$360 Call Spread
🗓 Trade Summary
- Entry Date: July 3, 2025
- Exit Date: August 7, 2025
- Entry Price: $335.49
- Exit Price: $381.68
- Strategy: $350/$360 Call Spread (2 contracts)
- Cost Basis: $3.55 per contract
- Max Profit Potential: $1,290 (181%)
- Actual Profit: $1,000
- Holding Period: ~35 days
🔍 Trade Outcome
- Final Stock Price: $381.68 – well above the upper strike ($360), ensuring full spread value.
- Spread Value at Exit: ~$8.55 per contract
- Profit Realized: $1,000 (approx. 141% return)
- Risk-Reward Execution: Excellent – captured most of the spread’s value before expiration.
📊 Technical Validation (Screenshot Insights)
- Screenshot 1:
- Price broke above Bollinger Band resistance with expanding volume.
- RSI confirmed momentum – no divergence, strong bullish continuation.
- Fib extension targets aligned with $368–$381 zone — precision hit.
- Screenshot 2:
- XBrat 3 Green Dots remained intact throughout – trend conviction held.
- MACD histogram showed sustained positive momentum.
- Volume shelf at $332–$335 acted as a launchpad – textbook demand zone behavior.
🧠 Gamma & Price Behavior
- Gamma Shelf ($345–$350): Price pinned and accelerated through this zone.
- Neutral Zone ($340–$344): Brief consolidation before breakout.
- Target Range ($368–$381): Hit upper target precisely – strong confluence.
🌐 Sector & Macro Tailwinds
- Machinery Rotation: CMI led sector strength within cyclicals.
- Infrastructure Spend: AI and industrial capex themes supported upside.
- Macro Catalyst: Cooling inflation boosted margin outlook – earnings anticipation added fuel.
✅ Execution Review
| Metric | Result |
| Entry Timing | Near support zone |
| Exit Timing | Near peak of target range |
| Risk Management | Stop never triggered |
| Spread Efficiency | High — captured 85%+ value |
| Trade Discipline | Strong — exited with profit before expiration |
📌 Lessons & Takeaways
- Confluence Matters: Technical + structural + signal alignment gave high conviction.
- Gamma Mapping Works: Understanding exposure zones helped anticipate movement.
- Sector Rotation is Real: Staying aligned with macro themes amplified edge.
- Spread Strategy: Limited risk, high reward — ideal for swing setups with earnings catalysts.
- Screenshot Confirmation: Visual signals reinforced setup strength — especially volume and momentum indicators.
Review by Paul Bratby:
The Cummins Inc. (CMI) trade journal entry is a masterclass in disciplined trading and meticulous analysis. The progress made throughout Mal’s trading journey is evident in the structured approach, confluence of signals, and execution precision. Here’s what stands out:
- Confluence Confirmation:
The alignment of technical, structural, and signal-based factors was impeccable. The 3 Green Dots XBrat Signal provided a solid foundation for conviction, while the Fib bounce zone and Bollinger mid-band support added layers of validation. This multi-dimensional approach showcases the trader’s growth in identifying high-probability setups. - Gamma Mapping Mastery:
The detailed gamma exposure mapping was a standout feature. Understanding the neutral, positive gamma shelf, and downside risk zones allowed for precise anticipation of price behavior. This level of insight reflects a deep understanding of market dynamics and risk management. - Sector & Macro Awareness:
The integration of macroeconomic themes, such as cooling inflation and infrastructure spending, into the trade thesis demonstrates a well-rounded perspective. Recognizing sector rotation and aligning with macro tailwinds amplified the trade’s edge—a clear sign of progress in strategic thinking. - Execution Excellence:
The entry and exit timing were near-perfect, with the trade capturing 85%+ of the spread’s value. The stop was never triggered, and the risk-reward execution was outstanding. This disciplined approach to trade management is a testament to the trader’s growth in maintaining focus and adhering to the plan. - Post-Trade Analysis:
The detailed post-trade breakdown, including technical validation, gamma behavior, and sector insights, highlights a commitment to learning and continuous improvement. The use of screenshots to validate the setup and outcome reinforces the importance of visual confirmation in trading.
Progress Reflected:
This journal entry reflects significant progress in the trading process. From identifying high-conviction setups to executing with precision and learning from the outcome, every aspect of this trade showcases growth. Mal’s ability to combine technical analysis, macro themes, and disciplined execution is commendable.
Key Takeaways:
- The importance of confluence in building conviction.
- The value of gamma mapping in anticipating price behavior.
- The power of aligning trades with macro and sector themes.
- The effectiveness of a structured journal in refining strategies.
Overall, this trade is a shining example of how a disciplined and methodical approach can lead to consistent success. Keep up the fantastic work Mal—your progress is inspiring! Check out more of Mal’s Options Trading Journals HERE
