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TradeKing Midday Market Call Recap - $SPX & $JPM

Options Trading TradeKing

Featuring @BrianOverby  &  @MNKahn

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Quick Takes Pro Market Technician Michael Kahn Analyzes the S&P 500:

SPX was trading at 1,882.30, up 10.86 on the day. In January there was a confirmed bullish hammer-candle, followed by a bullish rally that carried SPX until it hit a resistance zone at the long term trend line around 1,940. It then created a bullish hammer-candle once again finding support at the bottom of the previous hammer-candle’s range. Now the question Michael wants to answer is, “Is this a double bottom pattern?” While it’s possible he doesn’t believe that’s the case but rather thinks SPX has been oversold following negative sentiment. He also thinks the good news that’s been coming out of the Japanese and Chinese markets are helping to end the bearish run. Taking a longer-term look at SPX, Michael indicates a double-bottom pattern will not be present until the W pattern completes with SPX breaking out above the center peak from a couple of weeks ago, around 1,945.

Michael Kahn’s Chart of the Day: JPMorgan Chase & Co. (JPM):

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JPMorgan Chase & Co. was trading around the 57.98 level during the time of analysis, below its 50-day moving average of 58.95. Last week Jamie Dimon, JPMorgan’s CEO, decided to scoop up a healthy portion of stock for his personal account which pushed JPMs stock higher, taking much of the financial sector with it. Did that action cause an island-gap reversal? With the presence of bullish RSI divergence, OBV trending down, and a strong level of resistance just below 60 Michael doesn’t believe that reversal will continue.

TradeKing “Options Guy” Brian Overby Analyzes JPMorgan Chase & Co.’s Volatility & Dividends:

JPMorgan Chase & Co.’s 30-day Implied Volatility (IV) spiked around 45%, took a small dip, but is still relatively high.

JPMorgan Chase & Co. pays dividends quarterly and it’s next earnings announcement is slated for 04/13/2016.

Brian Overby Shares JPM Paper-Trading Strategies:


Brian’s paper trade’s today are Short Call Spreads, a neutral to bearish strategy that sells a call with a larger premium while buying a call with a lower premium. This allows you to limit your risk should the stock go up in value while still bringing in a credit. The strategy was mainly chosen because the 30-day implied volatility on the graph is near the yearly high and a short call spreads benefits if the implied volatility decreases after the trade is established. The hope would be that the IV would revert back to the mean average.

Brian’s First Paper Trade - Short Call Spread #1

- Sell 1 April 1st 2016 JPM 61 Call

- Buy 1 April 1st 2016 JPM 63 Call

- 45 days to expiration

- Net Bid 0.51, Mid 0.59, Ask 0.66 for the strategy

- Net credit is 0.59 if we get it at the mid-price, though note this is not always possible

- Maximum potential loss: $1.41

- Maximum potential gain: $0.59

- Total commission to enter this trade at TradeKing is $6.25

Brian’s Second Paper Trade - Short Call Spread #2

- Sell 1 February 26th 2016 JPM 60 Call

- Buy 1 February 26th 2016 JPM 61 Call

- 10 days to expiration

- Net Bid 0.23, Mid 0.27, Ask 0.30 for the strategy

- Net credit is 0.27 if we get it at the mid-price, though note this is not always possible

- Maximum potential loss: $0.73

- Maximum potential gain: $0.27

- Total commission to enter this trade at TradeKing 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 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 JPM Quote

- Short Call Spread

- TradeKing Volatility Charts

- TradeKing Options Pricing Calculator

- TradeKing Probability Calculator

- TradeKing P&L Calculator

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