Little bull call spread on Stellantis
I believe we are in the end of an accumulation. We had bad news lately about this company and his CEO. I don't want to own the stock, specially in this part of the economic cycle. This is purely a speculative trade.
There is a divergence in the awesome oscillator marking a possible end of the bear trend and right after, a period of low volatility characteristic of accumulations as we can see in the multiple historical volatility oscillator below. A spring a few days ago confirmed there were strong buyers. Now we are against the trendline.
So, I believe it's cheap (from ~€25 went down to ~€12,50) and it should make a bullish move shortly.
Strategy: Bull call spread
Expiration: 17 JAN 2025 (45 days to expiration)
Legs = +2 calls 13 and -2 calls 14
Premium = 0.27 * 100 stocks * 2 q per leg = €54
Max gain= €146
Risk / Reward = 2.7
Commissions= €1.5 (only open)
Break-even = From 13.27 (lower call + premium)
Historical Volatility (45 days) = 35,85%
Implicit Volatility = ~31%
In English: If the underlying (the stock) arrives at 13.27 I start earning money. If it gets to 14 or if it surpasses this price, I get to the max reward. I can lose at the most €54 + commisions even if the stock goes to €1.
The blue lines in the chart represent Breakeven, Max reward price and Expiration so I can follow the underlying. Now it's time to follow the DOM for each option.
I hope this process of thought helps you in your trades, specially if you are now to options.
There is a divergence in the awesome oscillator marking a possible end of the bear trend and right after, a period of low volatility characteristic of accumulations as we can see in the multiple historical volatility oscillator below. A spring a few days ago confirmed there were strong buyers. Now we are against the trendline.
So, I believe it's cheap (from ~€25 went down to ~€12,50) and it should make a bullish move shortly.
Strategy: Bull call spread
Expiration: 17 JAN 2025 (45 days to expiration)
Legs = +2 calls 13 and -2 calls 14
Premium = 0.27 * 100 stocks * 2 q per leg = €54
Max gain= €146
Risk / Reward = 2.7
Commissions= €1.5 (only open)
Break-even = From 13.27 (lower call + premium)
Historical Volatility (45 days) = 35,85%
Implicit Volatility = ~31%
In English: If the underlying (the stock) arrives at 13.27 I start earning money. If it gets to 14 or if it surpasses this price, I get to the max reward. I can lose at the most €54 + commisions even if the stock goes to €1.
The blue lines in the chart represent Breakeven, Max reward price and Expiration so I can follow the underlying. Now it's time to follow the DOM for each option.
I hope this process of thought helps you in your trades, specially if you are now to options.
Trade closed manually
Sold the spread because of the following reasons:
A - I didn't had in mind the time value and Time Decay was going to kill the premium. I thought 45 days was ok but in fact it is the beginning of the threshold.
B - A slight increment of volatility helped me.
C - Resistance stopped the rally by now, and if it ranges the strategy will lose value.
Lessons:
- It would have been better to buy a spread with more than 45 days in order to avoid an increasing Theta and Time Decay.
Result:
Break-even less commissions.
Note
I will keep an eye on this stock because I believe it has upside potential.Note
There's a major long-term trendline below the accumulation that is not showing that was key for this analysis. The spring reacted to it.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.