Price Forecast:

Bullish Case: CP shows sustained strength with impressive operational efficiencies and potential market expansion reflecting in the increasing demand for freight services and improving economic indicators. Implied volatility trends suggest potential for upward price movements.

Bearish Case: High market implied volatility indicates market uncertainty, primarily due to potential economic downturns and ongoing geopolitical tensions. Labor disputes may disrupt operations, posing risks to price stability.

Potential Outcomes:

1) Economic recovery boosts freight demand (40%);

2) Market correction due to geopolitical tensions (30%);

3) Successful resolution of labor disputes leads to price spikes (20%);

4) Continued price stagnation due to low trading volume (10%).

Trading Oracle: Adopt a bullish long volatility strategy using a debit spread, buying CP 12/20/2024 $80.00 C while selling $85.00 C to capitalize on potential upside from mean reversion. Define an exit strategy for positive returns as volatility stabilizes, targeting a potential 255% return on risk.

November 13, 2024