For the first time, individual traders have access to institutional-grade tools that can dramatically improve decision-making. Advanced charting, automation, and machine-learning analysis are no longer reserved for hedge funds.
To take advantage of that shift, I’m currently using AI-driven tools like TrendSpider to analyze more opportunities, more consistently, than would ever be possible manually. These tools allow me to scan the market at scale, identify trends and key levels objectively, and focus only on setups with clearly defined structure and risk.
The trade outlined below is one example of how that process translates into a real, executable idea. Stay tuned for more ideas like this.
One of my favorite patterns to trade is an ascending channel — a structure where a stock consistently posts higher highs and higher lows. These setups allow risk and upside targets to be defined clearly, while letting the broader trend do most of the heavy lifting.
That’s exactly what we’re seeing right now in American Electric Power (AEP).
AEP is currently trading around $115, and the chart shows a clean, well-defined ascending channel that has been in place for months. Price recently pulled back from the upper boundary of that channel and has now drifted down toward the lower rail — an area that has repeatedly acted as support during this trend.
What matters here isn’t just the pattern itself, but where price is right now. In healthy uptrends, pullbacks tend to be pauses, not failures. Buyers step in, sellers finish taking profits, and the trend often resumes higher.
If the channel continues to behave the way it has so far, the structure points to a potential move back toward the upper boundary of the channel, which currently lines up near $128 over the coming weeks. That doesn’t mean the stock has to get there. It simply means the odds favor continuation, with a clearly defined level where our thesis would be invalidated.
Rather than buying shares outright though, we can use options to in a way that caps risk, reduces capital required, and allows us to benefit from a directional move without needing perfection.
Specifically, we can use a bull call spread, which is well suited for this type of setup.
A bull call spread involves buying a call option at one strike price and selling another call at a higher strike price, both with the same expiration. The premium collected from the sold call helps reduce the upfront cost of the trade, while still allowing for gains if the stock moves higher. Upside is capped at the higher strike, but risk is defined from the start — making it a natural fit for a measured move higher inside an established uptrend.
Trade Structure
| Underlying | AEP |
| Strategy | Bull Call Spread |
| Expiration | February 20, 2026 |
How the Net Debit Is Calculated
Here’s exactly how the cost of the trade breaks down using current pricing from Fidelity (as I write). The net debit is simply the difference between what we pay for the long call and what we receive for the short call.
| Leg | Action | Details | Price |
|---|---|---|---|
| Leg 1 | Buy to Open | Feb 20, 2026 $115 Call | $3.65 |
| Leg 2 | Sell to Open | Feb 20, 2026 $125 Call | $0.77 |
| Net Debit (per share) | $2.88 | ||
Because each options contract controls 100 shares, the total capital at risk for one spread is $288. That amount represents the maximum possible loss on the trade.
Now that you’ve seen how the order is structured and priced, let’s walk through what this setup looks like in practice — including the defined downside, the breakeven point, and how returns scale if the stock moves higher.
Risk, Reward, and Potential Returns
To understand where these dollar figures come from, it helps to think in terms of intrinsic value at expiration. If AEP is at $125 or higher, our $115 call option is worth $10 of intrinsic value ($125 minus $115). Because we sold the $125 call, the spread is capped at that $10 maximum value.
Since we paid $2.88 for the spread, that $10 intrinsic value translates into a net profit of $7.12 per share. Multiply that by 100 shares per contract, and the result is a maximum gain of $712 per spread. If AEP finishes below the $115 strike at expiration, the spread expires worthless and the loss is limited to the $288 we paid upfront.
| Maximum Loss | $288 (-100%) |
| Maximum Profit | $712 (+247%) |
| Breakeven at Expiration | ~$117.88 |
While the maximum loss and maximum gain are clearly defined, the real edge comes from the distribution of outcomes. We’re risking a fixed, known amount to participate in a wide range of favorable upside scenarios if the trend resumes.
That capped downside combined with a broad upside window is what creates the attractive, asymmetric payoff profile in this setup.
| AEP Price at Expiration | $ P&L | % Return |
|---|---|---|
| $113 or below | -$288 | -100% |
| ~$118 | $0 | 0% |
| ~$122 | +$412 | +143% |
| $125 or higher | +$712 | +247% |
Bottom Line
The bounce off AEP’s lower channel rail sets up a classic trend-continuation opportunity. Using a bull call spread allows us to participate in a potential move back toward the upper end of the channel while keeping risk clearly defined from the start.
This isn’t about predicting the future or guaranteeing an outcome. It’s an educational walk-through of how a clear technical structure can be paired with a defined-risk options strategy to potentially enhance returns if the setup plays out — and limit damage if it doesn’t.
As always, do your own research, size positions appropriately, and only trade strategies that fit your experience level and risk tolerance.
Good trading,
Greg Patrick
P.S. As I mentioned at the beginning of this article, AI-driven tools like TrendSpider have fundamentally changed how individual traders can approach the market. I’m using TrendSpider to analyze opportunities at scale, identify trends and key levels objectively, and build repeatable scans that remove a lot of the guesswork from the process. The setup in today’s article is one real-world example of how I’m using those tools to turn structure into an executable trade plan.
P.P.S. All prices and examples shown are based on the most recent closing prices available at the time this analysis was prepared. Markets move, and option pricing can change quickly. By the time this article is published — and by the time you’re reading it — prices may differ.
If you choose to act on this idea, always check current quotes and confirm that the risk, reward, and overall setup still make sense for you.