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Recap for Tuesday, September 23rd by Kevin Corrigan here Analysis of S&P 500 from QuickTakesPro’s
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The Chart of the Day is Rowan Companies PLC (RDC) -
Analysis of RDC Volatility Chart and Dividends from TradeKing’s Brian Overby -
Technical Tools Used:
Brian Overby’s paper trade strategies based on Michael’s analysis -
Michael's analysis was bullish, but since the Implied Volatility level has jumped up recently, Brian discusses a short term Long Call Spread paper trade to attempt to offset any volatility crunch that may happen going forward. Brian also discusses a longer term Long Call paper trade with November expirations that will include the earnings announcement.
Brian’s Paper Trade - Long Call Spread (Short term)
- Buy 1 Oct 18 2014 RDC 25 Call
- Sell 1 Oct 18 2014 RDC 26 Call
- 25 Days to expiration
- Net Bid 0.45, Mid 0.55, Ask 0.65 for the strategy
- Net Debit is $0.55 if it filled at the Mid (May not be possible)
- Maximum potential loss: $0.55
- Maximum potential gain is $0.45
Total commission to enter this trade is $6.25
Brian’s Paper Trade - Long Call (Longer term - includes earnings)
- Buy 1 Nov 22 2014 25 Call
- 60 Days to expiration
- Bid 1.35, Ask 1.50
- Debit is $1.50
- Maximum potential loss: $1.50
- Maximum potential gain is technically 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.
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