Recap for Tuesday, November 11th by Kevin Corrigan
Did you miss Tuesday’s TradeKing Midday Market Call? Here’s a quick recap. Don’t miss another session, register here today!
Analysis of S&P 500 from QuickTakesPro’s Michael Kahn:
S&P 500 (SPX) – At the time of this broadcast, SPX was around 2038.75 up 0.49 today. It hit a 52 week high earlier today. It has moved well past its 50 day moving average of 1972.12 and it is above its 200 day moving average of 1919.70. Although it has been moving up to new highs, the Stochastic level of 99.36 suggests this could be overbought at this point. Still, the market is going up, so that is the trend.
The Chart of the Day is Delta Airlines (DAL) –At the time of this broadcast, DAL was at 43.76, up 0.39 today. It fell a few weeks ago, possibly with some regard to the Ebola scare, but has since rebounded and been going up as oil has been dropping. As DAL has climbed up, the On Balance Volume (OBV) has been decreasing which may suggest there’s not a lot of momentum behind the rally. We could be seeing an exhaustion of this rally at its new highs.
It is above its 50 and 200 day moving averages of 37.93 and 36.79, respectively.
Analysis of DAL Volatility Chart and Dividends from TradeKing’s Brian Overby –
DAL recently set a 52-week high (68%) in the 30-day implied volatility (IV) due to the big downturn in the stock price a few weeks ago. The stock price has bounced back and with that move, the IV has dropped precipitously to about 32%, which is quite a bit below the 30-day historical volatility (45%).
DAL pays a 9 cents per share dividend that went ex-dividend last week and earnings is not expected until January 20, 2015, so neither should have an effect on option prices.
Technical tools used:
– Moving Averages
Brian Overby’s paper trade strategies based on Michael’s analysis –
Michael’s analysis was short term bearish. Brian discusses two paper strategies, a longer term Long Put and a shorter term Long Put Spread with the December expirations. Both avoid the next scheduled earnings announcement on January 20, 2015.
Brian’s Paper Trade – Long Put – Buy 1 Dec 20 2014 DAL 43 Put
– 39 Days to expiration – Bid 1.53, Ask 1.57 for the option contract
– Debit is $ 1.57 if we get it at the Ask
– Maximum potential loss: $ 1.57- Maximum potential gain $ 41.43 if the stock goes to zero (not likely to happen)
Total commission to enter this trade is $ 5.60
Brian’s Paper Trade – Long Put Spread – Buy 1 Dec 12 2014 DAL 45 Put- Sell 1 Dec 12 2014 DAL 42.50 Put
– 31 Days to expiration – Net Bid 1.00, Mid 1.23, Ask 1.45 for the strategy
– Net Debit is $ 1.23 if we get it at the Mid (which may not be possible)
– Maximum potential loss: $ 1.27- Maximum potential gain: $ 1.23
Total commission to enter this trade is $ 6.25
**NOTE: option prices are given as a per contract amount. Multiply loss and gain figures by 100 shares and by the number of contracts traded to determine the amount of the full potential loss or full potential gain. No additional calculations are needed to determine commission costs.
TradeKing Options Tools used:
– Detailed Quote
– TradeKing Long Put
– TradeKing Long Put Spread
– TradeKing Volatility Charts
– TradeKing Options Pricing Calculator
– TradeKing Probability Calculator
– TradeKing P&L Calculator
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Kevin Corrigan, PMP
VP Content and Social Media
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