TradeKing Midday Market Call Recap - $SPX & $WMT
Featuring @BrianOverby & @MNKahn
Quick Takes Pro Market Technician Michael Kahn Analyzes the S&P 500:
SPX was trading at 1,897.40, up 18.61 on the day. Last Wednesday, we saw a huge drop in the SPX with it closing down for the day with a bullish hammer candle present. To show that this wasn’t a one-day rally, Michael indicated that we’re looking for a successful follow-through day. Coined by William O’Neil, the concept of follow-through days lies in the idea that when the markets start a rally attempt, you must throw out the first handful of days as it could be a short bounce or bottom-fishing. However, if the market surges in both price and volume in the 4-7 days following that hammer candle, then it may be real buying coming back in. We’re now in that window and Michael’s looking for a surge in price and volume.
Michael Kahn’s Chart of the Day: Wal-Mart Stores, Inc. (WMT):
Wal-Mart Stores, Inc. was trading around the 64.19 level during the time of analysis, above its 50-day moving average of 61.40. Following a steady year-long decline, WMT saw a break-through its support last October. Subsequently, a bullish flag emerged along with a rising trend-line with the 50-day moving average sitting right on top if it. These are all good short-term signals according to Michael. Now, the question is, can this continue? While the market’s strong today, Michael believes this stock is strong on its own merits and is not dependent on the market as it’s already gone through its bear market. If this thing can keep going, he expects the first stop to be around 68, then 71.
TradeKing “Options Guy” Brian Overby Analyzes Wal-Mart Store, Inc.’s Volatility & Dividends:
Wal-Mart Stores, Inc.’s 30-day Implied Volatility (IV) is beginning to spike in the shadow of the earnings announcement next month.
Wal-Mart Stores, Inc. pays dividends quarterly and it’s next earnings announcement is slated for 02/18/2016.
Brian Overby Shares WMT Paper-Trading Strategies:
Brian’s first paper trade is a Long Calendar Call Spread, a strategy that sells a call for the month that doesn’t contain the earnings and buys a call for the month that does have the earnings. Brian’s trying to take advantage of the potenial drop in implied volatility on the short term month and increase in implied volatility on the long term month that usually happens around an earnings report. His second paper trade is a Short Put Spread, a bullish strategy that can also be employed on stocks that have the potential to be neutral.
Brian’s First Paper Trade - Long Calendar Call Spread
- Sell 1 Feb 05th 2016 WMT 65 Call
- Buy 1 Feb 19th 2016 WMT 65 Call
- 10 days and 24 days to expiration
- Net Bid 0.71, Mid 0.76, Ask 0.81 for the strategy
- Net debit is 0.76 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: $0.76
- Maximum potential gain is limited to the premium received for the back-month call minus the cost to buy back the front-month call, minus the net debit paid to establish the position. NOTE: You can’t precisely calculate your max gain at initiation of this strategy, because it depends on how the back-month call performs at the front-month call’s expiration date.Maximum potential gain: $1.28
- Total commission to enter this trade at TradeKing is $6.25
Brian’s Second Paper Trade - Short Put Spread
- Buy 1 Feb 12th 2016 WMT 61 Put
- Sell 1 Feb 12th 2016 WMT 63 Put
- 17 days to expiration
- Net Bid 0.32, Mid 0.40, Ask 0.47 for the strategy
- Net credit is 0.40 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: $1.60
- Maximum potential gain: $0.40
- 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.