TradeKing Midday Market Call Recap $SPX & $DECK
Presented by @BrianOverby & @MNKahn
Quick Takes Pro Market Technician Michael KahnAnalyzes the S&P 500:
SPX was trading at 1845.93, down 7.51 on theday, well below both its 50-day (1981.33) and 200-day (2038.17) movingaverages. Michael started the webinar by drawing a support level at about 1860,and notes that he is a bit bearish as the index has dipped below this support.He came to a downside target near 1600 by examining the weekly format,specifically the trading range between 1850 and 2100 (about 250 points) datingback from December of 2014.
Michael Kahn’s Chart of the Day: Deckers OutdoorCorporation (DECK):
Deckers Outdoor was trading around the 49.96, up2.15 during the time of analysis, above its 50-day moving average of 47.86 butbelow the 200-day moving average of 61.35. DECK experienced a downward trendbeginning Q3 of 2015 and hit a new 52 week low around 40. Deckers has appearsto have broken out to the upside despite the overall bearish trend to themarket and having an earnings “miss” last week.
TradeKing “Options Guy” Brian Overby AnalyzesDeckers Outdoor Corp. Volatility & Dividends:
DECK’s 30-day Implied Volatility (IV) spiked in2016 up to an alltime high of over 70% while the stock approached earnings.Since Friday of last week, after earnings were announced, the 30-day IV haslowered below 50%. Deckers Outdoor Corporation currently has a 30-dayHistorical Volatility (HV) of 38.79%.
Deckers Outdoor Corp. does not pay a dividendand the latest earnings announcement was last Friday, February 5, 2016.
Brian Overby Shares DECK Paper-TradingStrategies:
Brian’s first paper trade was a Long Call Spread with the strike pricescentered around the current stock price. The goal was to buy approximately asmuch time value in the long in-the-money option as is received from the sale ofthe short out-of-the-money option contract, hence making time decay a non-issuefor the strategy. It is a bullish strategy that hopes the stock will reach the52.50 strike before the expiration date.
His second paper trade was a bullish Short Put Spread to bring in a credit.This trades was a 2.5 point spread utilizing the March 18th expiration, 38 daysaway.
Brian’s First Paper Trade - Long Call Spread
- Buy 1 March 18th 2016 DECK 47.50 Call
- Sell 1 March 18th 2016 DECK 52.50 Call
- 38 days to expiration
- Net Bid 2.30 debit, Mid 2.73 debit, Ask3.15 debit for the strategy
- Net debit is 2.73 if we get it at themid-price, though note this is not always possible
- Maximum potential loss: $2.73
- Maximum potential gain: $2.27
- Total commission to enter this trade atTradeKing is $6.25
Brian’s Second Paper Trade - Short Put Spread
- Sell 1 March 18th 2016 DECK 45.00 Put
- Buy 1 March 18th 2016 DECK 42.50 Put
- 38 days to expiration
- Net Bid 0.25 credit, Mid 0.50 credit, Ask 0.75credit for this strategy
- Net Credit is 0.50 if we get it at themid-price, though note this is not always possible
- Maximum potential loss: $2.00
- Maximum potential gain: $0.50
- Total commission to enter this trade atTradeKing is $6.25
Important notes: option prices are given as a per-contract amount.Multiply loss and gain figures by 100 shares and by the number of contractstraded to determine the amount of the full potential loss or full potentialgain. No additional calculations are needed to determine commission costs.
TradeKing Options Tools used:
- TradeKing Options Pricing Calculator
- TradeKing Probability Calculator
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