Northrop Grumman shares 2 months down 30%: a rebound strategy
Northrop Grumman shares have fallen 30 over the past two months. The article outlines ways to pursue a rebound while limiting downside risk, such as using options instead of buying shares directly.
Northrop Grumman’s share price has fallen 30 over the past two months. The decline occurred over a short period. The company’s share price has become more volatile.
The article assessed that the share price could rebound. It recommended seeking a rebound while reducing risk. The specific strategies are as follows.
First, use a cash-secured put. This involves setting aside cash and taking on the obligation to buy shares at a specified strike price, rather than purchasing the shares immediately. If the option is not exercised, the premium is retained as profit.
Second, it recommended directional options trades such as a call spread. A call spread involves buying a call option and selling a call with a higher strike price to reduce the cost. It is a way to lower costs while retaining some upside potential.
Third, it also introduced ways to limit downside risk through a protective collar or covered calls. A collar involves buying a put on shares held to protect against downside and selling a call to offset the cost. The article explained that position size, expiration, and strike selection are important.
Sources: CNBC Top News
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