by Ian Harvey
August 31, 2019
This Brexit trade we are considering is based on an options “strangle.” At Stock Options Made Easy we like to keep up-to-date with earth-shattering stock price moves, and the latest trade is related to “Brexit,”or if you prefer the “no-deal Brexit” debacle.
A Brief Overview…..
On October 31, the United Kingdom must decide whether it will leave the
European Union with a deal or without a deal.
Boris Johnson, the new British Prime Minister, has already signaled a departure regardless of a deal. A no-deal Brexit could be a shock to the system for the U.K. and leave it without a trade agreement with its biggest trade partner. That would subject the U.K. to billions of pounds in fines.
Many believe this is factored into prices... They are probably right.
However, with decisions this momentous, there is always room for a reversal, a panic or nothing at all. Investors are a nervous bunch, and they tend to react irrationally.
And, one stock that will be in the firing line, and reacts dramatically to all sorts of news – good, bad or indifferent - will be Royal Bank of Scotland Group PLC (NYSE: RBS), which is perfect for this Brexit trade.
As you can see from the chart below, RBS has been pushed lower!
In this instance I recommend a strangle, to facilitate this Brexit trade, where the expiry date takes into account when Brexit will take place. A strangle is when you take both sides of the play, a put and a call. If Brexit causes a panic, you should benefit from the put. If the decision is met with relief, you'll benefit from the call. If nothing happens... $0.45 is at risk. It's basically an all-or-nothing play.
A quick overview of a Strangle…..
The long strangle, also known as buy strangle or simply "strangle", is a neutral strategy in options trading that involves the simultaneous buying of a slightly out-of-the-money put and a slightly out-of-the-money call of the same underlying stock and expiration date.
About Royal Bank of Scotland Group…..
Royal Bank of Scotland Group is one of the largest British banks. The business model of the bank has changed significantly since the economic downturn. RBS has shrunk considerably in size - moving away from a business model that was operationally as well as geographically much more diversified and relied considerably on investment bank operations to one that depends almost completely on traditional loans-and-deposits banking.
If you decide that you wish to join us in this rare opportunity for a major market-moving decision, you will be given the negative and positive factors surrounding this play, as well as the trade.
“Armchair Trader Members” will be entering this play on Tuesday, so all the details can’t be shared, particularly the trade that we are going to be moving into.
Action to Take…..
At this stage we are predicting that the shares will move lower --- and/or recover --- a case of six-of-one and a half-dozen-of-the-other --- or in other words, either direction is possible!
Therefore, it is important that in these types of speculative trades you invest only money that you can afford to lose.
If you wish to get on-board with this trade click here.
Also, we have several other memberships that provide for various trading styles that you may prefer – check them out here.