Recap for Tuesday, November 27th by Kevin Corrigan
Did you miss Tuesday’s TradeKing Midday Market Call? Here’s a quick recap. Don’t miss another session, register
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 1408.10 up about 1.89 from Monday’s close. It is between its 50 and 200 day moving averages of 1424.64 and 1383.80, respectively. The trendline from last October has broken to the downside. Even with the rally last week, the SPX is still remains a good amount below that trendline. This leads Michael to believe this phase of the bull market from 2009 seems to be over. The path of least resistance at this point looks to be down for the market.
Both the Dow and the Nasdaq also appear to have similar patterns on the downside.
Analysis of Volatility Index from TradeKing’s Brian Overby:
S&P 500 Volatility (VIX) - is around 15.03, down about .47. It is below both the 100 day and 200 day moving averages of about 16.32 and 17.63, respectively. There’s not a lot of activity going on with the VIX. If we look out to the coming months, they also look to be down from earlier. The January contracts are around 17.37 and the February contracts are about 18.55.
Even the CBOE VIX Volatility Index (VVIX) is at its lows. It is around 81.61, well below its 50 day moving average of 89.70.
The market seems to be complacent. The VVIX near yearly lows could imply the market is not too worried about all the “fiscal cliff” talk.
Stock for the day is Priceline (PCLN):
Michael Kahn - At the time of this broadcast, PCLN was $640.66 up about .67 on the day. $550 is a level of support that was resistance last year. There was a little bit of a downward triangle forming, which could mean bad news for the stock, but PCLN recently broke through the trendline to the upside and seems be lingering at the 640 level waiting to make its next move. It is still between its 50 and 200 day moving averages of about $616.28 and $646 respectively. It also has a resistance level around $649, using round numbers. Michael sees resistance at the 649 line, and speculates a breakout above this price could spell upside potential.
Technical tools used:
Brian Overby’s strategy based on Michael’s Analysis – Short Put Spread
Since we are waiting to see if PCLN breaks out to the positive side, we will take a look at a neutral-bullish strategy. The Implied Volatility has recently dropped below the Historical Volatility to about 26%, the Historical is near 32-33%. Since the stock trades at a high price, we will see some premium built into the price of the options.
Possible Trade - Short Put Spread
- Buy 1 Dec PCLN 610 Put
- Sell 1 Dec PCLN 615 Put
- 25 days to expiration
- Net Bid .70, Ask 1.60, Mid 1.15
- Total credit is 1.15 if we can get filled at the Mid.
- Maximum potential loss is $3.85
- Maximum potential gain is $1.15
- Total commission to enter this trade is $6.25
Possible Additional Trade - Buy Long Call
- Buy a just out-of-the-money call if we do see the stock breakout
- Maximum potential loss is whatever the debit paid happens to be
- Maximum potential gain is unlimited if the stock goes to infinity (Not going 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 Short Put Spread
TradeKing Long Call
TradeKing Volatility Charts
Get solid market analysis and potential trading ideas. Take 15 minutes of your lunch with our team, as they analyze the market during this live online session. As an added bonus, a stock chart will be covered in detail each session accompanied by a potential option trade. This might be the most valuable thing you do all week! Every Tuesday midday from 12:00 - 12:15pm ET.
Don’t miss the next TradeKing Midday Market Call. Register here:
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.
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 pre-defined 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 Blogs 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
. Each All-Star commentator's bio, related qualifications and disclosure as to their relationship with TradeKing can be found on the
. 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.