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Options Trading

TradeKing Midday Market Call Recap - SPX, NEM

Recap for Tuesday, August 12th 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 1,930.75 down 6.17 today. The upward trendline going back to November 2012 is still intact. However, it has broken down through a couple of accelerated upward ones that have developed since February and April, and through its 50 day moving average of 1955.75. This line could now be acting as resistance. However, Michael mentioned that we would need to wait and see if it really is a point of resistance. If it does reach that level and fail, then “it could be a lot worse in terms of where the market is going,” according to Michael. There is no clear indicator as of yet.
It is still above its 200 day moving average of 1864.61.

The Chart of the Day is Newmont Mining (NEM) - At the time of this broadcast, NEM was at 27.32 up 0.79 today. After a bad previous year and several months of sideways trading, Newmont has been picking up. The 50 day moving average of 24.84 has just moved ahead of the 200 day moving average of 24.47 forming a “golden cross” pattern. This is a positive signal in Technical Analysis. It has broken above a resistance level of 26.43, previously intact since last November. If we take the distance of the low from resistance and add it to the current level, the next point of resistance could be 31.97. If we go out further to historical prices where it had a gap-down and a rebound back in April of 2013, a longer term level of resistance could be about 35.17, according to Michael.

Analysis of NEM Volatility Chart and Dividends from TradeKing’s Brian Overby
Both the 30-day implied and historical volatility levels are near year lows after its recent earnings announcement. The 30 day is about 23%, the implied at near 26%. The next earnings announcement is not until 10/30, so that should not affect the option expirations Brian will discuss. It pays a small dividend, about 3 cents per share, and the anticipated ex-dividend date is September 9th. However, because the dividend is relatively small, it shouldn’t have too much of an effect on options prices.

Technical Tools Used:

Moving Averages

- Trendlines

Brian  Overby’s paper trade strategies based on Michael’s analysis -

Michael's analysis is bullish short term and even more bullish longer term. With the 30-day implied volatility near yearly lows Brian discusses two simple Long Call paper trades. One with an September expiration and one with an October expiration, both have expirations before the next expected earnings announcement. 
  Brian’s Paper Trade - Long Call - Short-Term - Speculative - Buy 1 Sep 20 2014 NEM 28 Call
- 39 Days to expiration - Bid 0.59, Ask 0.61 for the Call 
- Debit is $0.61, if we execute at the Ask
- Maximum potential loss: $0.61 - Maximum potential gain is unlimited if the stock goes to infinity (not likely to happen).
Total commission to enter this trade is $5.60
Brian’s Paper Trade - Long Call - Long-Term - Less Speculative - Buy 1 Oct 18 2014 NEM 26 Call
- 67 Days to expiration - Bid 1.98, Ask 2.02 for the strategy  
- Debit is $2.02, if we execute at the Ask
- Maximum potential loss: $2.02 - Maximum potential gain is unlimited if the stock goes to infinity (not likely to happen).
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

TradeKing Long Call

- TradeKing Volatility Charts

- TradeKing Options Pricing Calculator

- TradeKing P&L Calculator

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