TradeKing Midday Market Call Recap: SPX, COMP, VIX, NOK

Published November 21, 2012

| TradeKing

Recap for Tuesday, November 20th  by Kevin Corrigan

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Analysis of S&P 500 and Nasdaq Composite from QuickTakesPro’s Michael Kahn:

S&P 500 (SPX) – At the time of this broadcast, SPX was around 1389 up about 2.33 from Monday’s close. It broke down below the 200 day moving average of 1382 last week, but has since rebounded. However, the low volume could indicate it is not a strong rebound. Right now, the 200 day moving average still looks like a resistance area and we have another big resistance level around the 1400 mark. To Michael, this looks to be more of a “dead cat bounce” heading into resistance overhead.

Nasdaq Composite ($COMP) - is trading around 2912.48 down about 3.59. A couple weeks ago it has broken below its trendline that was started way back in October 2011. It is now also below its 50 day and 200 day moving averages of 3047.17 and 2984.87. Much like SPX the Nasdaq has had a small rally on low volume with a lot of resistance overhead.

Analysis of Volatility Index from TradeKing’s Brian Overby:

S&P 500 Volatility (VIX) - is around 15.21, below its 50 day moving averages (MA) of about 16.18. The story with the VIX is, and has been for some time, that there’s just not a lot going on here. January contracts are trading around 18, which is above just around its 200 day moving average. Because the VIX is consider a mean reverting index it is common for the shorter term futures to trade near the 50 day MA, mid term to trade near the 100 day MA and the longer term to trade near the 200 day MA. This is the case currently, so once again nothing too exciting about the VIX.

Stock for the day is Nokia (NOK)

Discussion from QuickTakesPro’s Michael Kahn -  At the time of this broadcast, NOK was up 7 cents (2.21%), trading around $3.01. It is between its 50 and 200 day moving averages of $2.73 and $3.30 respectively. It has, however, broken through on the positive side of its Bollinger Bands, which could be a bullish sign for the stock. It’s next resistance level is around $5, but could be long term before it starts reaching that level again.

Technical tools used:

- Bollinger Bands
- Moving Averages

Brian Overby’s strategy based on Michael’s Forecast – Long Stock

Since the stock is below $5 and both implied and historical volatilities at around 50%, Brian is shying away from the options. A possible long term strategy (past January) could be to go long on the stock. If there is a possible option strategy, it could be to sell a covered call off it in January near-the-money.

Possible Trade - Long Stock

- Buy NOK
- Bid 2.99, Ask 3.01

- Total debt is 3.01 per share if we take the ask

- Maximum potential loss is $3.01/share

- Maximum potential gain is unlimited if the stock
goes to infinity (Not likely)

- Total commission to enter this trade is $4.95.

Possible Additional Trade - Sell Covered Call

- Sell 1 Jan 3 call
- Bid .26, Ask .28
- 60 Days to Expiration

- Total Credit is .26 cents if we hit the bid

- Maximum potential loss is 2.74

- Maximum potential gain is limited to the net credit received or 26 cents

- Total commission to enter this trade is $12.55

**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 Covered Call
- TradeKing Volatility Charts

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Kevin Corrigan
VP Content and Social Media

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

System response and access times may vary due to market conditions, system performance, and other factors.

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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