Educational Insights on Trading TCS Earnings Results: Key Options Strategies Explained
Tata Consultancy Services (TCS) results can bring significant market movements, creating opportunities for strategic trading. Using options strategies, traders can potentially profit from the volatility that results from the earnings report. Below are four strategies that can be employed based on different market expectations during TCS's result announcements.
π TCS Pre-Results Analysis (Closing Price: βΉ4108.40)
π Key Levels:
Support: 4000β4050 (Strong Put Writing at these strikes).
Resistance: 4150β4200 (Significant Call Buying observed).
πΌ Bullish Scenario:
If TCS sustains above 4150, it could test 4200β4250 levels.
π½ Bearish Scenario:
A fall below 4050 may lead to a test of 4000, but heavy support expected here.
βοΈ Range Before Results: Likely between 4050β4150 with a bullish bias if sustained above 4100.
π Keep an eye on 4100 as the pivot point for directional moves.
Ready to unlock the full potential of TCS earnings season? Whether you're a seasoned trader or just starting out, mastering the art of result-based trading can lead to profitable opportunities in the market. In this guide, we'll explore four powerful options strategiesβStraddle, Strangle, Iron Condor, and Butterfly Spreadβthat can help you navigate the volatility around TCS results.
1. Straddle Strategy π
A straddle involves buying both a call and a put option with the same strike price and expiration date. This strategy profits from significant price movements, regardless of direction. The idea is that TCSβs results might move the stock substantially in either direction.
When to Use:
Best used when expecting high volatility around the results, but uncertain about the direction. TCSβs earnings results often cause stock movements in either direction, making this a viable strategy.
Strike Prices to Trade:
Buy Call at 4100 (based on strong call activity).
Buy Put at 4100 (based on significant put writing near the same strike).
Risk = Total Premium Paid
Reward = Unlimited (due to significant movement in either direction)
Break Even:
For a straddle, the break-even points are calculated as:
Upper Break Even = Strike Price + Total Premium Paid
Lower Break Even = Strike Price - Total Premium Paid
With premiums varying due to volatility, expect a high premium during earnings season.
2. Strangle Strategy π£
A strangle is similar to a straddle, but it involves buying out-of-the-money (OTM) call and put options at different strike prices. Itβs a less expensive alternative to the straddle, but requires a more significant move to break even.
When to Use:
Ideal when you expect significant price movement in either direction, but with lower expected volatility.
A suitable option if you're looking for cheaper premiums but still expect the results to move the stock substantially.
Strike Prices to Trade:
Buy Call at 4200 (Anticipating an upside move)
Buy Put at 4000 (Anticipating a downside move)
Risk = Total Premium Paid(lower cost than straddle)
Reward = Unlimited (due to significant movement in either direction)
Break Even:
Upper Break Even = Call Strike + Total Premium Paid
Lower Break Even = Put Strike - Total Premium Paid
3. Iron Condor Strategy βοΈ
An Iron Condor strategy involves selling an out-of-the-money call and put option while simultaneously buying a further out-of-the-money call and put option to hedge. The strategy profits when the stock stays within a specific range, making it a good choice when you expect limited volatility post-results.
When to Use:
This strategy works best when you expect TCS's earnings to cause minimal stock movement, resulting in the stock staying within a specific range.
Strike Prices to Trade:
Sell Put at 3700
Buy Put at 3600
Sell Call at 4400
Buy Call at 4500
Risk(Limited) = Difference Between Strike Prices (of short options) - Net Premium Received
Reward(Limited) = Net Premium Received
Net Premium Received = Total Premium Received for Short Options (Sold Options) - Premium Paid for Long Options (Bought Options)
Break Even:
Lower Break Even: 3600 + Premium Received
Upper Break Even: 4500 - Premium Received
4. Long Butterfly Spread (Lower Risk)π¦
A butterfly spread involves buying one call and one put at a lower strike, selling two calls and two puts at a middle strike, and buying one call and one put at a higher strike. This is a limited-risk, limited-reward strategy that profits if TCSβs stock remains near the middle strike price.
When to Use:
Best for low volatility expectations around TCS's earnings, where you believe the stock will stay close to a certain price.
Strike Prices to Trade:
Buy Put at 4000 (Lower Strike)
Sell Put(2) at 4100 (Middle Strike)
Buy Put at 4200 (Higher Strike)
Risk(Limited) = Net Premium Paid
Reward(Limited) = Difference Between Strike Prices - Net Premium Paid
Net Premium Paid = Total Premium Paid for Long Options (Bought Options) - Premium Received for Short Options (Sold Options)
Break Even:
Lower Break Even: 4000 + Total Premium Paid
Upper Break Even: 4200 - Total Premium Paid
Which Strategy to Choose?
Straddle is best for high volatility when you expect TCSβs result to significantly move the stock price in either direction. However, the premium cost is higher due to anticipated volatility.
Strangle is ideal if you expect a volatile result but are not sure about the direction. The lower premium cost makes it a less risky option than a straddle, but it requires larger price movements to reach profitability.
Iron Condor is suitable when you expect minimal movement in TCSβs stock price post-results, and you are confident the stock will stay within a specific range.
Butterfly Spread is an excellent choice if you believe TCSβs stock price will hover around a particular strike price post-results. This strategy offers a low-risk approach with a high potential reward if the stock price remains stable.
Disclaimer:The content provided in this blog is for educational purposes only and does not constitute investment advice, recommendation, or endorsement. Trading in the stock market involves substantial risk, and past performance is not indicative of future results. Always conduct your own research or consult a professional financial advisor before making any investment decisions. The author and the website do not accept any liability for any loss or damage, including but not limited to any loss of profit, which may arise directly or indirectly from the use of this content. All trading strategies mentioned are solely for educational purposes and should not be construed as investment advice.
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Ruel Fernandes | STWP
βοΈ Email: ruelfernandes@simpletradewithpatience.com
π² WhatsApp: 9987567889
π Website: www.simpletradewithpatience.com
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