Trade Of The Week: Long Put – XJO
This week we have selected a long put on the XJO as Trade of the Week. The XJO has been experiencing most price action within a range of 5800 and 6200 since July 2020.
This week we have selected a long put on the XJO as Trade of the Week. The XJO has been experiencing most price action within a range of 5800 and 6200 since July 2020. The market is currently testing resistance at the 6200 level, which has been a major resistance since June 2020. The market has traded at (or close to) this level on the 9th and 10th of June, as well as the 11th, 19th, and 25th of August, and the 13th and 14th of August. IV is relatively low at 20.
We will set the strike at the major resistance level of 6200.
Enter long position:
B XJO 6200 19 Nov 2020 Put (E)
You can enter into this position for a premium of $1677 per contract.
Your maximum profit is $60,323 in the unlikely event the index falls to zero.
Your maximum loss is the initial premium paid for the position, $1677 per contract.
These values exclude brokerage and ASX fees.
For this trade we will be looking at an expiry on the 19th of November, which will limit the theta decay early on. We will close the position out if one of the following events occurs:
- The market has a strong and fast bearish move this week.
- The market falls to 5850 prior to the US election on November 3rd.
- Volatility increases significantly prior to the US election.
- We will close the position by November 3.
We won’t plan on holding this position past November 3rd. The markets are likely to change their behaviour following the US election so at that stage we will be looking for new patterns in the price action and re-evaluating this range trading strategy.
If you would like some more information on options trading strategies, call 1300 805 795.
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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.
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