Rising Trendline

The rising trend line is certainly one of the simplest tools used by technical analysts. It is important to be able to identify new trends developing in order to take advantage of market moves. A rising trend line is a straight line drawn upward along successive bottoms. Once you identify 2 periods of higher bottoms, a rising trend line can be drawn and the purpose is to play the third impact. It is well suited to a directional trading strategy, as a trailing stop can be set just below the trend line to protect accumulated gains.

ADAPTED OPTION STRATEGY: LONG SYNTHETIC FUTURES

When you are bullish on the market, the long synthetic futures strategy is ideal as it will not be affected by changes in volatility. Profit increases as the market rises. Profit is based strictly on the difference between the exit price and the synthetic entry price. Selling a Put effectively removes the risk of time decay for the long call position.

RISING TRENDLINE: CL F8 ON JAN 2018

LONG SYNTHETIC FUTURES: Leg 1

Trading Symbol LO F8
Option Type CALL
Option Strategy LONG
Strike 58.00

LONG SYNTHETIC FUTURES: Leg 2

Trading Symbol LO F8
Option Type Put
Option Strategy SHORT
Strike 54.50

ACTUAL OUTCOME

Trading Symbol CL F8
Strategy LONG
Entry Point 57.00
Target 63.00
Stop Loss 54.85
Contract Expiry JAN 2018

POTENTIAL GAIN PER CONTRACT

A target of 63.00 is the key resistance (a Fibonacci projection level). As a trend following strategy, the position should not be closed until a break of the trend line has been confirmed.

POTENTIAL DOWNSIDE PER CONTRACT

Once prices broke below 54.85 (it should also break below the rising trend line), the position should be closed with limited loss.

Rising Trendline Happening Now

Gold: GC

Soybeans: ZS


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