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Today we are looking at applying a Bull Call Spread on Newcrest Mining Ltd (NCM)

Analysis:

NCM is currently trading at $27.47

As the chart below indicates, NCM has been trading in an uptrend since bottoming out at roughly the start of March. It was then that NCM bounced from the long-term uptrend line. The last few days has seen NCM retrace, but today has it bouncing from the medium-term uptrend line. The bounce and recovery give confidence of a continue in the trend.

NCM is also benefiting from the stabilization of gold prices and from the strong upwards movement in the copper price.

There are few ways this can be traded. We suggested to our clients today to trade an NCM Bull Call Spread. The minimum suggested risk was roughly $2500. As the payoff matrix shows, a great profit is made if NCM reaches the local resistance at roughly $28.90. In addition, the trade is time decay positive, so if NCM takes the stairs on the way up, or tracks sidewards into the trend line, the trade continues to profit. These numbers are fairly rough, and don’t show any potential shifts in implied volatility, but it is a reasonable representation of what is to be expected if the trade was entered.

If you would like to learn how and when to use this strategy, and other strategies like it, then please contact us here at TradersCircle on 03 8080 5788. Alternately, you can download a free eBook off our website which runs through advanced strategies.