We continue our series of articles about vanilla options on easyMarkets.
The tougher international situation due to the American attack on Syria offers some opportunities for people playing the vanilla options. For example, you can use the so-called long straddle strategy – hoping that weekend will be something that will cause a sharp price jump. This strategy involves buying the same number of buy and sell options with the same execution rate and same expiration date.
A sharp decline will make the profit from put option enough high to cover the loss from call options. Conversely, in case of high growth, buy options would be profitable. The pessimistic variant of the long straddle would be that nothing would happen and the price of oil would be stuck where it is. Then the options will expire, and the investor will lose bonuses.
The second possibility results from what you can see on the H1 chart. And you see three things: First, the oil has come to a red resistance line. Second, the price reaction to the US air raids was quite calm, which is a testimony to the weakness of the market. Thirdly, on the chart we have a blue line of upward trend describing the whole reflection of the last days. The line runs through four turning points, so breaking it would be a pretty plausible predictor of declines. As a result, if you break a blue line on Monday, you can use this to open a long position on your options. I emphasize: on Monday.