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Trade Of The Week: Bull Call Spread on WBC

August 11, 2021

Trade Of The Week: Bull Call Spread on WBC

With earnings season coming up there are plenty of stocks paying dividends which can get tricky when trading options. However Westpac Banking Corporation is now expected to go ex-dividend for another 92 days.

With earnings season coming up there are plenty of stocks paying dividends which can get tricky when trading options. However Westpac Banking Corporation is now expected to go ex-dividend for another 92 days.

ASX:WBC is sitting at the 50 DMA and could break through this level on the open, as positive news regarding CBA’s dividend pushes values across the banking sector. The closing share price was $25.58. If the stock can break the 50 DMA, there could be a quick move towards the $26.50 level.

Source: Implied Volatility

Implied volatility currently sits at 19.1% which is relatively low compared to the previous 52 weeks, which equates to an IV rank of 14.

To take advantage of the low implied volatility and make the most of this anticipated move we can enter into a bull call position. This strategy is a debit spread so you pay an upfront premium to enter into the position.

To profit from a rising market, we can enter into a Bull Call Spread position.

The goal is for the position to rise in value so you can sell it back to the market at a higher price, locking in the value.

Being a bullish trade, the position will increase in value as the market rises.

Enter Bull Call spread:

We will set the long call’s strike around closing highs at $25.50.

The next level of resistance is around $26.50 so we will set the strike of the sold call below this level at $26.00.

The coloured lines on the payoff diagram describe the time decay of the position. If the stock rises, time decay will work in favour of the position. If the market falls, time decay will work against the position.

If the market hits the $26.50 resistance level you can consider closing out the position early.

If you would like some more information on options trading strategies, call 1300 805 795. 

You can also follow this link for a detailed tour of the Implied Volatility platform.

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. Please note, we provide General Advice only and do not take into consideration your own personal circumstances, you must decide if it’s appropriate for you. 

 

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 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.

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.

 


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.

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