After the UK CPI came hotter than expected, short positions are shining on the horizon. The UK100(FTSE) index looks over-extended to the bullish side, but better than shorting the index itself is finding a highly correlated with the index position, which in our case is HSBC.
As you can see the periods in the past are marked with verticals, whenever the index corrects HSBC follows. Currently, the level at which the stock price is sitting is at a weekly resistance zone.
Most traders who are only attracted to the risk-to-reward ratio would most likely skip such an amazing opportunity. Here comes the options. I am not going to short the stock itself but rather buy put options. To be even more specific I am buying puts at 44$ which costs 0.50$ for the 21st of June.
Long story short with 3000$ dollars you can buy 60 puts.
At 40$ your puts will be worth ~12,000$ or slightly more due to the premium.
You may say But what if it goes up and I lose my 3K, but that's not the case here.
The moment I am buying the puts I am buying 1000 shares long.
At 43$ my stock shares will be exactly 3K$ profit so my initial investment is fully covered on top of that I can still sell my put options even though they will be worth around 0.10$ but still possibly +600$.
To keep it simple:
At 40$ your 60puts will be worth 12,000$.
12,000$- 3,000$(cost of puts) - 1000shares*-4.30(4300) so we will have net profit of +4,700$
The potential win versus the initial investment may seem as unfavourable but keep in mind we are making an arbitrage trade here and the chance of losing capital is close to zero.
The ATR (Average True Range), which represents the average movement of an instrument for HSBC is 1.65$ on a weekly basis. This means that the 5 weeks we have until the strike of the option we can easily expect 4-5$ to move in either direction.
On top of that, we have NVIDIA reporting Q1 aftermarket, which will set the tone for the markets for the rest of the week.
Every comment gets answered:)
Before you jump on this financial rollercoaster, remember: past performance is like your ex's mixtape—nostalgic but not always relevant! 🎢💸 Always consult with a financial advisor before you trade your lunch money for stock options.
As you can see the periods in the past are marked with verticals, whenever the index corrects HSBC follows. Currently, the level at which the stock price is sitting is at a weekly resistance zone.
Most traders who are only attracted to the risk-to-reward ratio would most likely skip such an amazing opportunity. Here comes the options. I am not going to short the stock itself but rather buy put options. To be even more specific I am buying puts at 44$ which costs 0.50$ for the 21st of June.
Long story short with 3000$ dollars you can buy 60 puts.
At 40$ your puts will be worth ~12,000$ or slightly more due to the premium.
You may say But what if it goes up and I lose my 3K, but that's not the case here.
The moment I am buying the puts I am buying 1000 shares long.
At 43$ my stock shares will be exactly 3K$ profit so my initial investment is fully covered on top of that I can still sell my put options even though they will be worth around 0.10$ but still possibly +600$.
To keep it simple:
At 40$ your 60puts will be worth 12,000$.
12,000$- 3,000$(cost of puts) - 1000shares*-4.30(4300) so we will have net profit of +4,700$
The potential win versus the initial investment may seem as unfavourable but keep in mind we are making an arbitrage trade here and the chance of losing capital is close to zero.
The ATR (Average True Range), which represents the average movement of an instrument for HSBC is 1.65$ on a weekly basis. This means that the 5 weeks we have until the strike of the option we can easily expect 4-5$ to move in either direction.
On top of that, we have NVIDIA reporting Q1 aftermarket, which will set the tone for the markets for the rest of the week.
Every comment gets answered:)
Before you jump on this financial rollercoaster, remember: past performance is like your ex's mixtape—nostalgic but not always relevant! 🎢💸 Always consult with a financial advisor before you trade your lunch money for stock options.