Today we are applying a Bull Put spread on Bank of Queensland Limited (BOQ)
Analysis:
BOQ is currently trading at $8.78.
BOQ has come down to a key support and held it. This implies so far that BOQ is reluctant to head further down. Last time it was at these levels it bounced higher. Instead of doing a directional trade though, we can instead look at a Bull Put. This puts us in a position where we can place all our risk below the support level and profit from both sidewards and bullish movement. If BOQ travels higher, we can close for an early profit, but if it just goes sidewards, as long as it holds support we can also make maximum profit by expiry. This also provides the flexibility to wait for the expected rebound from support, but doesn’t need it.
The Strategy:
There are many different types of options strategies used in different market conditions. The key reasons traders use this style of strategy is that:
- Benefits from time decay (as time progresses, our trade increases in value).
- A very popular strategy used in a rising to sideways market.
- Allows for some upward movement.
- Can be used by busy people as the risk can be managed from a far.
- Has the possibility to close out for zero brokerage.