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Today we are looking at applying a Bull Put Spread on Woodside Petroleum Limited (WPL).

Analysis:

WPL is trading at $33.93.

WPL has been trading in a solid uptrend since the lows at the start of the year. More recently, it has surged higher, largely driven by supply issues as a result of Russia invading Ukraine. Like the price of oil, we have seen it stall and track sideward for a few weeks (albeit with volatility). Recently, it has come to meet with the uptrend line and bounced higher from $32.

There is a clear resistance at roughly $34, but it has tried peeking its head through it today. Instead of trading directionally though, we suggest doing a short dated Bull Put with a sold leg at $32.50 which is underneath the uptrend line. This way, if WPL does stall here and continue to track sideward then we can continue to hold the trade. With expiry of April 21st around the corner, time decay should do a lot of the heavy lifting meaning we can profit from any sideward movement.

Here is the setup of the trade:

Max Risk: $4,500

Max Reward: $1,500 (premium received).

The matrix below shows the profit and loss of the position (not the positions total value) at different prices on different days. Come expiry on the 21st of April (looking at the 23rd on the Matrix) maximum profit of $1500 is made provided the stock remains above the sold Put at $32.50. This means the share price can fall roughly 4% and the trade still makes maximum profit come expiry day. On the other hand, if the share price was to rise only 2% (to $34.58) by the 14th, then a tidy $1,020 is made. For profits to be taken sooner, then you would want to see a keen 4% rally to $35.255 where a tidy $900 profit should be made in a few days time.

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