Analysis:
STO is currently trading at $7.09.
STO’s underlying commodity is Oil and Gas – both of which have been going strong lately. This is in part, due to the tensions in Eastern Europe as the prospect of war typically sees energy prices rise.
STO also looks oversold in the short-term following its report. It returned to the conjunction of the 50, 100, and 200 day MAs (green, blue, red) and bounced higher today, breaking the short term downtrend line. The short-term stochastic also show they are oversold.
A Bull Call Spread can be used to profit from not only bullish movement, but sideward movement also. As STO can tend to whip around (like the broader market) it would make sense to be able to profit from time and be flexible in waiting for the bullish move.
The risk of this strategy is capped to $4,130 (premium) based on 140 contracts (quantity).
The payoff matrix shows the profitability of the trade. If the share price went to $7.445 then the profit would be $1,260 in a couple of days. To clarify, this means you would close the trade for $5,390 ($4,130 + $1,260).
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.