Trading Range Upward Breakout

A trading range is a lateral pattern exhibiting limited market volatility. The price movement is concentrated within a horizontal channel which is defined by a key support and resistance level. When the price breaks either of these key levels, an acceleration signal is given. To avoid false breakouts, look for a clear breakout beyond the level and enter the position on the throwback.

ADAPTED OPTION STRATEGY: LONG RISK REVER- SAL

A long risk reversal option strategy can be used when you are bullish on the market and uncertain about volatility. Its risk/reward is the same as a LONG FUTURES position except that there is a flat period of little to no gain/ loss. Profit increases as prices rise above the long call strike price. Loss increases as prices fall below the short put.

LONG RISK REVERSAL: Leg 1

Trading Symbol OH H7
Option Type CALL
Option Strategy BUY
Strike 3350
Expiration Mar 2017

LONG RISK REVERSAL: Leg 2

Trading Symbol ON H7
Option Type PUT
Option Strategy SELL
Strike 3250
Expiration Mar 2017

ADAPTIVE FUTURES STRATEGY

Trading Symbol NG H7
Strategy LONG
Entry Point 3.32
Target 3.43
Stop Loss 3.28
Contract Expiry Mar 2017

TRADING RANGE UPWARD BREAKOUT: NG H7 JANUARY 12TH

ACTUAL OUTCOME

POTENTIAL GAIN PER CONTRACT

The theoretical target of this strategy is an upside movement equal to the height of the trading range. Trading range height: 3.32 - 3.21 = 0.11. The target can be calculated as follow: 3.32 + 0.11 = 3.43.

POTENTIAL DOWNSIDE PER CONTRACT

If the price falls back into the trading range area, the position is closed with a limited loss. Note that the price did pullback into the trading range area in the 3 hours following the upward breakout. To reduce the risk of being deactivated during the throwback, you should accept a corrective move about a third of the trading- range height.

Trading Range Upward Breakout happening now in the markets

Copper: HG

E-Mini Utilities Select Sector: XAU


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