Today we are applying a Calendar Bull Call spreader on AGL
Analysis:
AGL is currently trading at $20.25.
AGL is a stock that typically trends quite strongly for long periods of time. Recently, it has broken the down trend after hitting a key support mid August. Since it has started trading in an uptrend. Today shows it breaking the resistance. AGL has been drifting higher recently so instead of outright buying the stock we can look at a Calendar Bull Call instead, with the idea of taking full advantage of time decay as well as bullish movement.
AGL is also relatively cheap against the other major competitors in this space so we believe there is plenty of room to grow to the upside.
With this strategy, the idea is to buy a Call for December, and sell a Call option in the current month. This potentially puts you in a position where you can make a profit if you have a quick decent jump up to roughly $20.50. Otherwise, you could hold this trade, and if the sold leg expires, sell against it again for December to pick up additional credit. This reduces the capital risk of the trade and increases the potential profitability. This strategy in some ways can be similar to a Covered Call without owning the stock.
So considering this, it’s a great strategy to use where you can make great profits over an extended period of time provided the stock eventually travels upwards. This fits AGL which tends to trend for extended periods of time.
