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Trade Of The Week: Long Call on WTC

April 7, 2021

Trade Of The Week: Long Call on WTC

WTC is sitting on a key pivot point in its market and with 5 consecutive days of green candles and price rises, there may be enough buying pressure to continue trading higher towards the $34 level.

WTC is sitting on a key pivot point in its market and with 5 consecutive days of green candles and price rises, there may be enough buying pressure to continue trading higher towards the $34 level.

Source: Implied Volatility

The stock started bouncing off the 200 Day MA on the 30th of March 2021, which has been a powerful support level for much of the market over the past week. The market gapped above the 50 Day MA and continued to trade higher during tuesday’s session.

As a business, WiseTech Global is a leading global developer and provider of software solutions to the logistics industry. They provide solutions to over 17,000 logistics organisations across 160 countries, supported through 50+ offices worldwide.

WTC was able to increase its underlying EPS by 58% in 1H21 (compared to 1H20) even with the pandemic wreaking havoc on trade around the globe. With the IMF projecting global GDP growth at 6% in 2021, and 4.4% in 2022, Wisetech’s outlook for 2021 and 2022 are strong.

This will be a short term trade (rather than waiting for the macro story to play out) hoping for a quick move towards the $34.00 level after it breaks through the $31.00 price level. If the market opens above this level on Thursday, then it will be time to enter the position.

 

Enter position:

Buy Long $31.00 20 May 21 Call (A)

We are doing a single legged trade here for 3 reasons:

 

  • We don’t want to limit the upside if the market moves quickly;
  • Ease of entering and exiting the position for illiquid options series; and
  • Better payoff for a quick entry and exit (i.e. not waiting for time decay to kick in).

 

We will be setting the expiry date to May 20, 2021 to limit time decay. With IV at 41 time decay can be quite expensive even for a short term position.

We will be looking to exit the position when WTC is trading between $33 to $34. The time frame for achieving this will be one week. If we have not reached $33 to $34 by the 16th of April we can close the position. We choose this date as the stock may be sitting at-the-money on the 15th of April, so we can wait until the end of day 16th of April to close the position i.e. after April’s monthly expiry day. (Sometimes there are large moves on or after a monthly expiry day and these moves can be very profitable).

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

Or click here to book into the next ‘Trading 360 Summit’ on the 14th of April. Wrapping up the March 2021 Trading 360 Summit, Ivan Tchourilov from one of the busiest option trade desks in Australia will be showcasing the most successful strategies seen in the ASX Options Game, and our panel of professionals will be answering any questions from the floor.

 

The Trading 360 Summit – Winning Formulas For Success
Date: Wednesday, 14th April
Time: 7pm AEST
Format: Online, 60 minute presentation + Q&A

 

This is a free event. Click here to book your spot.

 

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. 

 

 


General Advice Warning

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