Today we are looking at applying a Bull Put Spread on Wesfarmers Ltd (WES).
Analysis:
WES is currently trading at $55.63
WES has been tracking sideward at the bottom of the range for the past couple of weeks. With the broader market rallying alongside the U.S, WES may have the confidence to start pushing higher. Today shows some strength returning to the share price, with some technical indicators also turning bullish. There is resistance in the way, and the recent bearish move may continue to weigh on any expected shorter-term gains.
Therefore, to trade this, we could like at a Bull Put spread in the coming days. The idea would be to sell at $54 – they key support, for November expiry. Provided WES remains above that key support at $54 come expiry, the trade makes maximum profit. If we do see a continued rally to roughly $58 (a good target considering that is where the 50 and 100 day MAs come in), then we should be able to close early for a nice profit as well. The Bull Put is a great strategy because we profit from both sideward and bullish movement. WES can even pull back to $54 and we can still make our maximum come expiry in November.
