The closer the closing price is to the high and the longer the lower shadow, the stronger the hammer.
Following the hammer trading day, a white bullish candlestick will confirm the short squeeze.
As the upside potential is unlimited, selling premium can be an excellent strategy to create income during volatile market periods. As long as Oil stays above $39.14 (stop- loss) until expiration, this strategy will keep the credit received when the bull put spread position was opened. Pairing the short put with a long put at a lower strike price helps reduce the margin required for a naked put option position and defines the total risk of the strategy. The option strategy is entered for a net credit.
|BULL PUT SPREAD: Leg 1|
|Trading Symbol||LO U6|
|BULL PUT SPREAD: Leg 2|
|Trading Symbol||LO U6|
|ADAPTIVE FUTURES STRATEGY|
|Trading Symbol||CL U6|
|Contract Expiry||AUG 2016|
The maximum gain is unlimited for the futures position and limited for the bull put spread to the total credit received on writing the spread.
If the price closes below 39.14, the futures position will be closed at a limited loss thanks to the stop-loss. The bull put spread is a limited loss strategy as max loss is reached once prices fall to 35.
Copyright TRADING CENTRAL
The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Any opinion offered herein reflects TRADING CENTRAL current judgment and may change without notice. Users acknowledge and agree to the fact that, by its very nature, any investment in shares, stock options and similar and assimilated products is characterised by a certain degree of uncertainty and that, consequently, any investment of this nature involves risks for which the user is solely responsible and liable.
Services in the U.S. are offered through TRADING CENTRAL Americas, Inc.
TRADING CENTRAL is not registered in France as an Investment Services Provider but complies with the following rules and directives, including:
- General Regulation Handbook of the AMF, Book III, Title III, Chapter VII "Investment Analysts Not Associated with an Investment Services Provider"
- EU Commission Directive 2006/73 dated 10 August 2006, Articles 24 and 25
- EU Commission Directive 2004/39 dated 21 April 2004
- EU Commission Directive 2003/125 dated 22 December 2003
This message is intended for recipient only and not for further distribution without the consent of TRADING CENTRAL. Although TRADING CENTRAL attempts to sweep e-mail and attachments for viruses, it does not guarantee that either are virus-free and accepts no liability for any damage sustained as a result of viruses.
Trading Central is a leading provider of independent investment research to financial market professionals, specialising in the field of technical analysis. Founded in 1999, Trading Central now has offices across North America, Europe and Asia, providing research to over 200 leading investment banks, FCMs, hedge funds, brokers and exchanges in over 45 countries.