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Today we are looking at applying a Bull Put Spread on Fortescue Metals Group Limited

Analysis:

FMG is currently trading at $21.60

FMG has been trading in a strong uptrend since the start of 2019. Through most of March though, FMG experienced a pullback triggered by falls in iron ore prices. Since, MFG has recovered alongside Iron Ore prices, creating another short term uptrend. Today has FMG breaking the $21 resistance. In addition, fundamentally FMG is a stock that trades on low PE and future PE ratios compared to its peers and the Australian market in general.

We suggested to our clients to trade a Bull Put spread, with a sold leg at $21 for the 6th of May. Provided FMG remains above that price come that date, maximum profit is achieved. If FMG were to continue its rally to roughly $22.50, a reasonable profit can be obtained in the short term. But as time goes by, the amount of bullish needed is reduced. The ability to trade both bullish movement and sideward movement is just one reason why we like trading Options.

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.