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TradeKing Midday Market Call Recap - $SPX & $LULU

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 2,049.63 at the time of analysis, up 0.99 on the day. The “dome-ish” rounded top we’ve been watching over the last several weeks broke to the upside with a surge occurring a couple days ago. A steep short-term trendline was created that is still intact. Michael points out that until that trendline breaks, SPX should continue in the short-term direction the market is heading in. The 200-day average was also broken to the upside which Michael believes can be a good indication if you’re bullish. Michael also looked at RSI and MACD which showed the market not being terribly overbought and that there’s nothing telling us it’s over yet - no matter how risky it may seem.

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Michael Kahn’s Chart of the Day: Lulu Athletica inc. (LULU):

Lulu Athletica inc. was trading around the 59.10 level during the time of analysis, below its 50-day moving average of 61.29. LULU had been on a rising trend since December until a downside breakaway gap occurred last week resulting in a serious downward move with decent volume. Looking at RSI momentum divergence, Michael points that it wasn’t strong but was still present with lower peaks in the RSI and higher peaks in price. Michael believes the new resistance level is just under $64, near the closing price of LULU the day before the gap down in September. LULU has bounced off its support twice but it’s still below its 50-day moving average and the trendline and appears to be in a breakdown in Michael’s opinion. He believes that if it continues to falter and drops below the support around $58.70, there’s no telling how far it could drop.

TradeKing “Options Guy” Brian Overby Analyzes Lulu Athletica inc.’s Volatility & Dividends:

Lulu Athletica inc.’s 30-day Implied Volatility (IV) and 30-day Historical Volatility (HV) are both rather high but the IV is increasing while HV is dropping. This is typically an indication that earnings are on their way.  

Lulu Athletica inc. does not pay dividends and it’s next earnings announcement is slated for 03/30/2016.

Brian Overby Shares LULU Paper-Trading Strategies:

Both of Brian’s paper trades today were Short Call Spreads, a neutral to bearish strategy that could be useful here as we’re waiting on something to happen - specifically for LULU to drop below its $58.70 support level that was mentioned by Michael.

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


- Buy 1 Mar 24th 2016 LULU 63 Call
- Sell 1 Mar 24th 2016 LULU 61 Call

- 2 days to expiration

- Net Bid 0.30, Mid 0.35, Ask 0.39 for the strategy

- Net credit is $0.35 if we get it at the mid-price, though note this is not always possible

- Maximum potential loss: $1.65

- Maximum potential gain: $0.35

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

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


- Buy 1 May 20th 2016 LULU 70 Call
- Sell 1 May 20th 2016 LULU 67.50 Call

- 59 days to expiration

- Net Bid 0.41, Mid 0.51, Ask 0.61 for the strategy

- Net credit is $0.51 if we get it at the mid-price, though note this is not always possible

- Maximum potential loss: $1.99

- Maximum potential gain: $0.51

- 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 LULU Quote

- Short Call Spread

- TradeKing Volatility Charts

- TradeKing Options Pricing Calculator

- TradeKing Probability Calculator

- TradeKing P&L Calculator

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