Tata Power is all set to announce its June quarter results on 9 August. The closing price of the stock was ₹233.45 on 7 August.
Interested in trading options?
Let's understand what a straddle is.
Long straddle: A trader will buy a straddle if he or she believes that Tata Power will be volatile before 31 August 2023.
This strategy is deployed by buying at-the-money (ATM) call and put options of the same expiry and strike.
Short straddle: A trader will sell a straddle if he or she believes that Tata Power would not be volatile before 31 August 2023.
This strategy is deployed by selling ATM call and put options of the same expiry and strike.
Now, let’s find out critical levels while trading in Tata Power options contract
- The premium for 235 CE (ATM call option) is ₹7.30
- The premium for 235 PE (ATM put option) is ₹7.45
- When we add these, we get the expected movement (up or down) from the current price. In this case, it’s 14.75 or ±6.32% of 233.45.
- This means the upper range is ₹248.20 and the lower range is ₹218.70
Deploying straddle for Tata Power contract
For options traders, earnings announcements provide an opportunity to trade on the volatility.
Deploy a Long Straddle if you believe Tata Power will move more than (±6.32%)
Deploy a Short Straddle if you believe Tata Power will move less than (±6.32%)
Interested to know more about straddles? Check out our UpLearn education content. If you want to see more historical earnings price data like in the table above for this stock, sign-up for our community, let us know, and we will share it!
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