Today we are applying a Bull Put spread on Boral Limited (BLD)
Analysis:
BLD is currently trading at $4.53
BLD has fallen to a key level of support at $4.45 and stalled. Today shows bouncing higher. This support has held the stock up a few times in the past, and we can try to use it as a defensive level to protect our trade.
We can place a Bull Put underneath the support level, and if BLD holds key support by expiry, we can make maximum profit. The Bull Put profits from both bullish and sidewards movement, so if BLD does continue to drift, the trade remains profitable. This may eventuate considering BLD has recently preferred to move slowly rather than in leaps and bounds.
The strategy:
There are many different types of options strategies used in different market conditions. The key reasons traders use this style of strategy is that:
- Benefits from time decay (as time progresses, our trade increases in value).
- A very popular strategy used in a rising to sideways market.
- Allows for some upward movement.
- Can be used by busy people as the risk can be managed from a far.
- Has the possibility to close out for zero brokerage.