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Trade Of The Week: Long Straddle on ANZ

March 31, 2021

Trade Of The Week: Long Straddle on ANZ

ANZ currently has an IV of 19, the lowest since March 2020. The stock has also been trading at a major resistance level at $28.60.

ANZ currently has an IV of 19, the lowest since March 2020. The stock has also been trading at a major resistance level at $28.60.

The stock tested this level in May, June and October 2019 and failed to consolidate convincingly above this level. Now the stock is trading at this level again we should expect a large move in one direction or the other shortly after hitting it.

Source: Implied Volatility

 

The next major resistance level will be around $29.40, followed by $30.30. The next major support level will be around $28.00, followed by the range around $26.90 and the 50 Day MA ($26.60).

We will enter into this position when ANZ hits $28.60 again.

 

Enter position:

Buy ANZ $28.50 20 May 2021 Calls
Buy ANZ $28.50 20 May 2021 Puts

Source: Implied Volatility

 

Exiting the position:

For this trade we will be hoping for a quick move towards the first support or resistance level, then a break towards the next support/resistance level. When it hits the second support/resistance level, close the position.

Theta will be expensive with 2 long legs, so if this price move does not occur in the next week, you can close the position at a potential loss, in order to prevent further theta decay.

Alternatively, you can close part of the position –  sell your profitable leg and hold your unprofitable leg in the hope the market moves in the opposite direction. If you choose this method, you must consider whether you would pay to enter into the remaining position from scratch or not. If you wouldn’t, just close the position to reclaim some premium.

On a side note, if we see a quick uptick in volatility for ANZ, the value of these options will also increase ceteris paribus. A quick jump in implied volatility to between 25 to 30% may be worth considering as an exit signal.

Source: Implied Volatility

 

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 7th 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, 7th 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. 

 

 


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