The Strategy: Long Strangle
- Profits from both a rise, and a fall in the share price.
- You don’t have to have a strong directional view.
- Must have a certain amount of either bullish or bearish movement.
- Movement must occur quickly (within a day or two).
- Can be skewed to be more bullish or bearish.
When to Use
- Volatility events where large share price movement is expected.
- When it’s difficult to pick direction.
- A hedge is needed.
- Strong break outs.
If Trading the Report:
- Check a handful of previous reports movements
- 5% move is a minimum rule of thumb
- Enter a couple days prior as implied volatility will likely rise leading into the report.
Example: Origin Energy Ltd (ORG)
- ORG is trading at $4.29.
- Reports in two days (19th of August).
- Buy a September Call and a Put at $4.3.
- Profit target is an 8 – 10% share price movement.
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. Alternately, you can access some free resources off our website which runs through advanced strategies.