Recap for Tuesday, January 8th 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 and Nasdaq Composite from QuickTakesPro’s Michael Kahn:
S&P 500 (SPX) – At the time of this broadcast, SPX was around 1454.22, down about 7.67 from Monday’s close. The SPX has recently hit its highest levels since 2007. Right now the big question is whether that is a positive sign or a new level of resistance. We could be in a wait-and-see period, according to Michael. It has rebounded from the levels it dropped to with the whole the fiscal cliff uncertainty. It is above both the 50 and 200 day moving averages of 1413.61 and 1391.77, respectively.
In other news: The Nasdaq chart doesn’t have a whole lot of new information. It is not at its highs. The Russell 2000 is at all time high levels, might be a “January effect” rally in the small caps.
Analysis of Volatility Index from TradeKing’s Brian Overby:
S&P 500 Volatility (VIX) - is around 14.14, up about .35 today. The VIX recently had one of its largest collapses on a percentage basis in its history. It dropped from its pre-fiscal-cliff high of about 24. It is back to about its 5 year lows. It is also below the 50 and 100 day moving averages of 16.83 and 16.19, respectively.
The February contracts are about 16.70 and March is 18.27. So, there could be higher volatility going forward now that we enter earnings season and a new debt ceiling fight in Washington.
To learn more about trading VIX option contracts, check out Brian’s blog here.
Stock for the day is Navistar International Corporation (NAV)
Discussion from QuickTakesPro’s Michael Kahn - At the time of this broadcast, NAV was $22.96 up about .62 on the day. It appears to have a resistance level of near 26.25. It is between its 50 day, 200 day moving averages of around 20.67 and 25.75. It looks to be in a rounded bottom formation and repairing itself from recent lows.
Technical tools used:
- Moving Averages
Brian Overby’s less speculative strategy based on Michael’s Analysis – Long Call Spread
Since Navistar appears to be stabilized and in a rounded bottom pattern from its recent lows, we will look at a neutral to bullish trade. Both its implied and historical volatilities are both just above 40% and it since they recently released earnings, this level could be interpreted as low expectation of any major news coming out in its near future.
Possible Trade - Long Call Spread
- Sell 1 Feb 16th NAV 26 Call
- Buy 1 Feb 16th NAV 23 Call
- 39 days to expiration
- Net Bid .90, Ask 1.10, Mid 1.00
- Total net debit is 1.10 if we can get filled at the Ask.
- Maximum potential loss is $1.10
- Maximum potential gain is $1.90
- Total commission to enter this trade is $6.25
Possible More Speculative Trade - Long Call
- Buy 1 Jan 19th NAV 21 Call
- 11 days to expiration
- Net Bid 2.05, Ask 2.15
- Total debit is 2.15 if we can get filled at the Ask.
- Maximum potential loss is $2.15
- 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 Long Call 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: www.tradeking.com/events
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 www.TradeKing.com/ODD.
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 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.
Continue Reading Below