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Featuring @BrianOverby and @MNKahn
Analysis of S&P 500 fromMichael Kahn with QuickTakesPro:
S&P 500 (SPX) – At the timeof this broadcast, SPX was at 2097.68, down 2.72 today. After the “Fridayfreak-out,” Michael mentions that the index remains in the range over the lasttwo months. The resistance from last week was followed by a big Fridaysell-off, but the pattern remains bullish with a strong support and earlyrecovery on Monday.
SPX continues to sit just aboveits 50 day moving average of 2086.57 and above the 200 day moving average of 2021.15.
The Chart of the Day is GileadSciences (GILD):
Gilead was around 104.78, up 4.12at the time of broadcast. Michael states that this biotech stock was “killingthe S&P 500” in 2013 and 2014. However, it has had a pullback over the last6-8 months. On-balance volume may be a “slight warning” for the stock, butMichael believes the stock’s price stability may confirm a new breakout.
GILD’s 50 day moving average is101.37 and the 200 day moving average is 101.33.
Analysis of GILD Volatility Chartand Dividends from TradeKing’s BrianOverby:
GILD’s 30-day Implied Volatility(IV) is at 30.48% and the 30-day Historical is sitting at 19.22%. Inanticipation of an expected after-close earnings announcement on April 30th, HVhas dropped while IV has risen.
Gilead doesnot currently pay a dividend. It’s worth noting the company plans to start paying an annual dividend of $1.72 per share ($0.43 on a quarterly basis) starting inthe second quarter of 2015.
Brian Overby’s paper tradestrategies based on Michael’s analysis:
Michael’s outlook is bullish.Earnings is expected within 10 days, Brian discusses a DiagonalCall Spread as his first strategy. We’re expecting earnings soon, dealingwith potential implied volatility swings. His goal is to hedge our long optionby selling an option that expires before earnings. His second strategy is a LongCall Spread, also known as a Bull Call Spread. This strategy uses longer termoptions with the intention to buy an in-the-money option that has about as muchtime premium as the out-of-the-moneyoption that is being sold to limit exposure to wild implied volatilitymovements.
Brian’s Paper Trade - DiagonalCall Spread
- Sell 1 April 24th 2015 GILD 106Call
- Buy 1 May 1st 2015 GILD 105Call
- 3 days to the April 24thexpiration
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- 10 days to the May 1stexpiration
- Net Bid 2.04, Mid 2.13, Ask2.21 for the strategy
- Net debit is 2.13 if we get itat the Mid, may not be possible
- Maximum potential loss: $2.13
- Maximum potential gain islimited to the premium received for the sale of the later expiration (May 1st)call when that position is later closed, minus the cost to buy back the earlierexpiration (April 24th) call also at that time, minus the 2.13 net debit paidto establish the position.
*NOTE: You can’t preciselycalculate potential profit at initiation of this strategy, because the max gainis limited by what the market prices of the options will be at the time theposition would be closed-- selling to close the long (May 1st) leg, and buyingto close the short (April 24th).
Total commission to enter thistrade is $6.25
Brian’s Paper Trade - LongCall Spread
- Sell 1 May 15th 2015 GILD 107Call
- Buy 1 May 15th 2015 GILD 102Call
- 24 days to expiration
- Net Bid 2.49, Mid 2.63, Ask2.78 for the strategy
- Net Debit is 2.63 if we get itat the Mid, may not be possible
- Maximum potential loss: $2.63
- Maximum potential gain: $2.37
- Total commission to enter thistrade is $6.25
**NOTE: option prices are given as a per contract amount. Multiply loss andgain figures by 100 shares and by the number of contracts traded to determinethe amount of the full potential loss or full potential gain. No additionalcalculations are needed to determine commission costs.
TradeKing Options Tools used:
- DetailedGILD Quote
- TradeKing P&L Calculator
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