TradeKing Midday Market Call Recap - $SPX & $JPM
Featuring @BrianOverby & @MNKahn
Quick Takes Pro Market Technician Michael Kahn Analyzes the S&P 500:
SPX was trading at 1,882.30, up 10.86 on the day. In January there was a confirmed bullish hammer-candle, followed by a bullish rally that carried SPX until it hit a resistance zone at the long term trend line around 1,940. It then created a bullish hammer-candle once again finding support at the bottom of the previous hammer-candle’s range. Now the question Michael wants to answer is, “Is this a double bottom pattern?” While it’s possible he doesn’t believe that’s the case but rather thinks SPX has been oversold following negative sentiment. He also thinks the good news that’s been coming out of the Japanese and Chinese markets are helping to end the bearish run. Taking a longer-term look at SPX, Michael indicates a double-bottom pattern will not be present until the W pattern completes with SPX breaking out above the center peak from a couple of weeks ago, around 1,945.
Michael Kahn’s Chart of the Day: JPMorgan Chase & Co. (JPM):
JPMorgan Chase & Co. was trading around the 57.98 level during the time of analysis, below its 50-day moving average of 58.95. Last week Jamie Dimon, JPMorgan’s CEO, decided to scoop up a healthy portion of stock for his personal account which pushed JPMs stock higher, taking much of the financial sector with it. Did that action cause an island-gap reversal? With the presence of bullish RSI divergence, OBV trending down, and a strong level of resistance just below 60 Michael doesn’t believe that reversal will continue.
TradeKing “Options Guy” Brian Overby Analyzes JPMorgan Chase & Co.’s Volatility & Dividends:
JPMorgan Chase & Co.’s 30-day Implied Volatility (IV) spiked around 45%, took a small dip, but is still relatively high.
JPMorgan Chase & Co. pays dividends quarterly and it’s next earnings announcement is slated for 04/13/2016.
Brian Overby Shares JPM Paper-Trading Strategies:
Brian’s paper trade’s today are Short Call Spreads, a neutral to bearish strategy that sells a call with a larger premium while buying a call with a lower premium. This allows you to limit your risk should the stock go up in value while still bringing in a credit. The strategy was mainly chosen because the 30-day implied volatility on the graph is near the yearly high and a short call spreads benefits if the implied volatility decreases after the trade is established. The hope would be that the IV would revert back to the mean average.
Brian’s First Paper Trade - Short Call Spread #1
- Sell 1 April 1st 2016 JPM 61 Call
- Buy 1 April 1st 2016 JPM 63 Call
- 45 days to expiration
- Net Bid 0.51, Mid 0.59, Ask 0.66 for the strategy
- Net credit is 0.59 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: $1.41
- Maximum potential gain: $0.59
- Total commission to enter this trade at TradeKing is $6.25
Brian’s Second Paper Trade - Short Call Spread #2
- Sell 1 February 26th 2016 JPM 60 Call
- Buy 1 February 26th 2016 JPM 61 Call
- 10 days to expiration
- Net Bid 0.23, Mid 0.27, Ask 0.30 for the strategy
- Net credit is 0.27 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: $0.73
- Maximum potential gain: $0.27
- Total commission to enter this trade at TradeKing is $6.25
Important notes: 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:
- TradeKing Options Pricing Calculator
- TradeKing Probability Calculator
Options involve risks and are not suitable for all investors. Prior to buying or selling options, an investor must receive a copy of Characteristics and Risks of Standardized Options, sent to you in previous communication. Additional copies may be obtained by calling TRADEKING at 877-495-KING or by visiting www.TradeKing.com/ODD.
Multiple leg options strategies involve additional risks, and may result in complex tax treatments. Please consult a tax advisor.
At the time of publication and in the preceding month, TradeKing and/or Michael Kahn did not have ownership greater than 1% in any stocks mentioned; did not have any other actual, material conflict of interest known at the time of publication; have not received compensation from a public offering nor from investment banking services related to any companies mentioned within the past 12 months, nor expect to receive any in the next 3 months; nor engaged in market making in the securities mentioned.
System response and access times may vary due to market conditions, system performance, and other factors.
Any strategies discussed and examples using actual securities and price data are strictly for illustrative and educational purposes only and are not to be construed as an endorsement, recommendation, or solicitation to buy or sell securities. Past performance is not a guarantee of future results. Consider the following when making an investment decision: your financial situation, your risk profile and transaction costs.
Market timing is a complex investment strategy which involves risk and may incur additional commission costs.
While implied volatility represents the consensus of the marketplace as to the future level of stock price volatility, there is no guarantee that this forecast will be correct.
TradeKing charges $4.95 for online equity and option trades, add 65 cents per option contract. TradeKing charges an additional $0.35 per contract on certain index products where the exchange charges fees. See our FAQ for details. TradeKing adds $0.01 per share on the entire order for stocks priced less than $2.00. See our Commissions + Fees page for commissions on broker-assisted trades, low-priced stocks, option spreads, and other securities.
The projections or other information generated by TradeKing's tools regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. The calculations do not take into consideration all costs, such as commissions and margin interest which may impact the results shown. It is the user's sole responsibility to select the criteria to enter in the TradeKing's tools, or to choose among the predefined screens, and to evaluate the merits and risks associated with the use of the tools before making any investment decisions. TradeKing is not responsible for any losses that occur from such investment decisions.
TradeKing Webinars and All-Star Blog are provided for educational and informational purposes only.
All investments involve risk, losses may exceed the principal invested, and the past performance of a security, industry, sector, market, or financial product does not guarantee future results or returns. TradeKing provides self-directed investors with discount brokerage services, and does not make recommendations or offer investment, financial, legal or tax advice. You alone are responsible for evaluating the merits and risks associated with the use of TradeKing's systems, services or products.
TradeKing selects and defines as All-Stars certain independent market commentators who are recognized industry personalities and experienced traders and who provide timely market commentary via the TradeKing All-Star Blog and/or TradeKing Webinars. Each All-Star commentator's bio, related qualifications and disclosure as to their relationship with TradeKing can be found on the All-Star Roster. The selection of All-Star commentators is solely based on the quality and style of the content provided. TradeKing does not measure, endorse, or monitor the performance or correctness of any statement or recommendation made by independent All-Stars commentators. Supporting documentation for any claims made by TradeKing All-Stars will be supplied upon request by the author of the post, who is solely responsible for the views expressed. Contact TradeKing All-Stars by sending an email message to TKallstars@tradeking.com.
? 2016 TradeKing Group, Inc. All rights reserved.