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Trade Of The Week: Long Put – WPL

September 23, 2020

Trade Of The Week: Long Put – WPL

This week we have selected a Long Put trade strategy on WPL. This is a bullish trade that aims to take advantage of the short term bearish direction that the stock is heading. This is not a view that the stock is expensive at $18, it’s just a view that there is only unconvincing levels of buying pressure considering it is at a major support level. WPL bounced twice when it hit the $21 and $20 support levels – each time the first bounce was more convincing than the second. The stock dived straight through $19 and has bounced slightly at $18. Energy demand is as good a barometer of global economic conditions as any other indicator and while the overall market has risen 100 points today, WPL trades flat.

This week we have selected a Long Put trade strategy on WPL. This is a bullish trade that aims to take advantage of the short term bearish direction that the stock is heading. This is not a view that the stock is expensive at $18, it’s just a view that there is only unconvincing levels of buying pressure considering it is at a major support level. WPL bounced twice when it hit the $21 and $20 support levels – each time the first bounce was more convincing than the second. The stock dived straight through $19 and has bounced slightly at $18. Energy demand is as good a barometer of global economic conditions as any other indicator and while the overall market has risen 100 points today, WPL trades flat.

There are 2 expiry dates we would consider: 15th of October 2020 and 19th of November 2020, both with a strike price of $18.00.

An expiry date of the 15th of October would suit someone looking to benefit from a shorter term trade. An expiry on the 19th of November would suit someone who is expecting an increase in volatility around the US election, allowing you to potentially profit when volatility increases before November 3rd.

WPL has good market maker coverage which means the spreads will be smaller.

 

We will set the strikes at $18.00.

Enter Long Put Strategy:

Buy WPL 18.00 15 Oct 20 Put (A)

Quantity = 70

Cost = $2870

Break even = $17.59

 

OR

 

Buy WPL 18.00 19 Nov 20 Put (A)

Quantity = 40

Cost = $2980

Break even = $17.255

 

If there is a large bearish move and volatility jumps, you may consider closing the position early to lock in the profits. If you would like some more information on options trading strategies, call 1300 805 795Please note we provide General Advice only.

 

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 1300 805 795 .

 

Past performance is not a reliable indicator of future performance.

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. 

 


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