News

Trade Of The Week: Long Straddle on XJO

April 14, 2021

Trade Of The Week: Long Straddle on XJO

The XJO is sitting at a very important psychological technical level. The last time the market was sitting at these levels was between 15th of January 2020 and 24th of February 2020.

The XJO is sitting at a very important psychological technical level. The last time the market was sitting at these levels was between 15th of January 2020 and 24th of February 2020. The market has recently been consolidating around the 7000 level waiting for a trigger to move in either direction.

When the market moved around this level in 2020 it moved very quickly on both the upside and the downside. This time round we have seen 5 consecutive days of consolidation at this price level which is convincing us that it will have to make a big move soon. You can rarely time the market however we are 5 trading days closer to another big move than we were 5 trading days ago.

Source: Implied Volatility

 

Enter position:

Long XJO 7000 20 May 21 Call (E)
Long XJO 7000 20 May 21 Put (E)

Total cost: $2,094

Source: Implied Volatility

 

We will be setting the expiry date to May 20, 2021 to limit time decay. We have chosen the monthly expiries for liquidity, however you could also choose May 6th 2021 weekly expiry. With IV at 12 time decay will be somewhat limited.

We are looking for a move over the next 5 days – up or down 150 points.

If we see a big move early on we can close the position and take the profits.

If we see a large uptick in volatility we can also close out the position for a profit. The table below shows the value of the positions at a range of underlying prices, over a range of dates, with an increase in implied volatility of 25%.

Source: Implied Volatility

We are not necessarily looking for large gains on this trade, we will be content with a small quick profit.

 

For further information on using the Implied Volatility platform you can follow this link, here.

To try trading for yourself using the most powerful Options Trading technology in Australia, click here for a trial for our Implied Volatility platform

We wish you good luck with your trading, and as always if you have any questions, please feel free to contact our trading desk on (03) 8080 5795. Please note, we provide General Advice only. 

  

Past performance is not a reliable indicator of future performance. 

The opinions expressed in this article are our personal views. 

Trading options is not suitable for everyone. There is a risk that you can lose more than the value of a trade or its underlying assets. You should only trade if you are confident that you fully understand what you are doing. If you are thinking about acquiring a financial product, you should consult our Financial Services Guide (FSG) at www.reachmarkets.com.au first. 

Any advice provided by Reach Markets including on its website and by its representatives is general advice only and does not consider your objectives, financial situation or needs, and you should consider whether it is appropriate for you. This might mean that you need to seek personal advice from a representative authorised to provide personal advice. If you are thinking about acquiring a financial product, you should consider our Financial Services Guide (FSG) including the Privacy Statement and any relevant Product Disclosure Statement or Prospectus (if one is available) to understand the features, risks and returns associated with the investment.

Please click here to read our full warning.

 


General Advice Warning

Any advice provided by Reach Markets including on its website and by its representatives is general advice only and does not consider your objectives, financial situation or needs, and you should consider whether it is appropriate for you. This might mean that you need to seek personal advice from a representative authorised to provide personal advice. If you are thinking about acquiring a financial product, you should consider our Financial Services Guide (FSG) including the Privacy Statement and any relevant Product Disclosure Statement or Prospectus (if one is available) to understand the features, risks and returns associated with the investment.

Please click here to read our full warning.

Investor Briefing

Learn how data centres are shaping Australia's business growth

Leave a comment