Recap for Tuesday, Aug 21 by Kevin Corrigan

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Analysis from Quick Takes Pro’s Michael Kahn:

S&P 500 (SPX) – at the time of this broadcast, SPX was around 1,420.15 up 2.02 from Monday’s close. The SPX seems to be in a bullish pattern. It has broken above both the 50 day and 200 day moving averages of about 1331.90 and 1365.30 respectively. It has also broken through a 4 year high resistance level around the 1420. Although, it is in a positive trend, Michael is not sure why we have been on this bullish trend. He thinks it is mainly based on a lot of promises of stimulus and EU pledging to “save the world” recently. The four year high may be a price ceiling, will be interesting to see if it can close above that level today.
 


Dow Jones (DJI) - at the time of this broadcast, the Dow was around 13,267 down a couple points. Although it is not at historical highs, it looks to be in an area of resistance where investors could be thinking to take profits.

Discussion from TradeKing Options Analyst Brian Overby:

VIX – at the time of this broadcast, VIX was about 14.32, up about 0.30 from yesterday. Not a lot going on here. The market is pretty boring and not a lot of actual volatility happening and the VIX near it’s yearly lows is reflecting that. One interesting thing to note is that was a lot of buying in the September 23 and 28 call contracts yesterday suggesting that whoever was buying those expect a much more volatile September. But right now, it is pretty flat and rightfully so.
 


Michael Kahn’s Chart of the Day is Newmont Mining - NEM

Newmont Mining - At the time of this broadcast, NEM was 48.69, up about .56 from yesterday. This is a stock that has taken a big drop off its highs. If we look at possibly retracement levels, we could see a long term level of about 54.31 which is near the 200 moving day average of about 54.49.

Late last month, it looks like it bottomed out and has been moving up since. It just broke through the 50 day moving average of about 47.12 and possibly headed to the 200 day.



Technical tools used:

- Support / resistance
- Trendlines
- Moving Averages

Brian Overby’s potential strategy based on Michael’s chart – NEM – Long In-The-Money Call

NEM - Newmont Mining is another stock that doesn’t seem to have a lot going on in terms of volatility. The historical and implied volatility is very close to its yearly low. The Implied is about 25% and the Historical is a bit higher. Looking a longer time frame for this one to play out. More of an investment then swing trade. So we are looking to look at a long term expiration. Keep in mind that Earnings are not until October. When looking to invest we would like the option to act more like that stock, which means we want a higher delta somewhere around .70. .

NEM – Possible Conservative Strategy - Long Call

- Buy 1 NEM Jan 45 (market was Bid 5.50, Ask 5.60)
- 151 days until expiration
- Total net debit is 5.60 if we take the Ask.

- Maximum potential loss is the debit paid of 5.60

- Maximum potential gain is unlimited if NEM goes to infinity (which of course is unlikely)

- Total commission to enter this trade is $5.60

NEM – Possible Speculative Strategy - Long At-The-Money Call

- Buy 1 NEM Jan 48 Call (market was Bid 3.70, Ask 3.80)
- 151 days until expiration
- Total net debit is 3.08 if we take the Ask.

- Maximum potential loss is the debit paid of 3.80

- Maximum potential gain is unlimited if NEM goes to infinity (which of course is unlikely)

- Total commission to enter this trade is $5.60

**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 / Earnings Calendar
- TradeKing Long Call
- TradeKing Volatility Charts

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Regards,
Kevin Corrigan
VP Content and Social Media
www.tradeking.com

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.

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.

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Multiple leg options strategies involve additional risks and multiple commissions, and may result in complex tax treatments. Please consult a tax advisor.

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.
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