TATAMOTORS is all set to announce its June quarter results on 25 July. The stock closed at ₹621.65 on 20 July.
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 shares of Tata Motors will be volatile before 27 July 2023.
(It is constructed by buying ATM call and put options of the same expiry & same strikes)
Short straddle: A trader will sell a Straddle if he or she believes that shares of Tata Motor would not be volatile before 27 July 2023.
(It is constructed buy selling ATM call and put options of the same expiry & same strikes)
Now, let’s find out critical levels for trading TATAMOTORS options contract
- The premium for 620 CE (ATM call option) is ₹14.00
- The premium for 620 PE (ATM put option) is ₹11.45
- When we add these, we get the expected movement (up or down) from the current price. In this case it's 25.45 or ±4.0% of 621.65
- That means the upper range is 647.10 and the lower range is 596.2
Deploying straddle for TATAMOTORS contract
For options traders, earnings announcements provide an opportunity to trade on the volatility.
Deploy a Long Straddle if you believe TATAMOTORS will move more than (±4.0%)
Deploy a Short Straddle if you believe TATAMOTORS will move less than (±4.0%)
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!
Disclaimer
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