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Rajveer Rawlin

Rajveer Rawlin

Rajveer Rawlin received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher having followed capital markets in…

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Option Strategy to Capture The Next Big Move in The Market

It appears that volatility will be the name of the game going forward. The Vix appears to be headed upwards in the short term. If volatility was to surge upwards implied volatility on options would do the same. On the daily chart the S and P 500 looks set to break out of a coiled spring like formation out of its recent trading rage between 2040 and 2120. A strangle strategy would help in capturing this as earnings season> begins.

Current S and P 500 spot - 2076

S&P 500 Daily Chart

Looking at options prices on the CBOE expiring April 30:
2070 puts are available near $25
2080 calls are available near $24
Break even points - 2021, 2129
make money - below 2021 or above 2129
loose money - between 2021 and 2129.

It is note worthy that several asset classes are on the verge of breakouts from their recent trading ranges and such a strategy could be extended to them. In the commodity space gold, copper and crude stand out:

USO Chart

GLD Chart

In the forex space the Japanese Yen crosses particularly EUR/JPY, AUD/JPY and GBP/JPY stand out:

EUR/JPY Chart

AUD/JPY Chart

 

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