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Quick Takes Pro Market Technician Michael Kahn Analyzes the S&P 500:
SPX was trading at 2,099.84 at the time of analysis, up 9.79 on the day. Not much has changed from last week as we continue to keep an eye on the current bullish rally. Michael’s confidence in SPX’s positive momentum following the double-bottom we saw earlier in the year initially waned. However, once a flag-pattern emerged followed by a breakout, his confidence increased and he believes it may be an indication that SPX is in fact bullish and the rally may continue. Drawing a trendline from SPX’s most recent highs leads Michael to believes 2,116 may be a soft target that SPX is heading towards.
Michael Kahn’s Chart of the Day: Chevron Corp. (CVX):
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Chevron Corp. was trading around the $99.86 level during the time of analysis, above its 50-day moving average of $93.80. The first thing Michael points to is a nice breakout through the resistance ceiling earlier this month. CVX tested it, fell back, tested it again and finally broke through in early April. While volume wasn’t high on the break-out, on-bounce volume is rising, RSI looks strong, and the relative performance to S&P 500 is edging higher. All-in-all Michael likes this stock and anticipates it will continue its rally in step with the oil rebound.
TradeKing “Options Guy” Brian Overby Analyzes Chevron Corp’s Volatility & Dividends:
Chevron Corp.’s 30-day Implied Volatility (IV) is currently sitting at low looking back over the last 6-month period which is very interesting considering that earnings are on the horizon. Typically IV is higher before an earnings event occurs.
Chevron Corp.pays quarterly dividends and its next earnings announcement is anticipated to be on 04/29/16.
Brian Overby Shares CVX Paper-Trading Strategies:
Brian’s first paper trade was a Long Call, a straight-forward bullish strategy. His second paper trade is a Skip Strike Butterfly a slightly more advanced trade that’s also known as a broken wing butterfly.
Brian’s First Paper Trade - Long Call
- Buy 1 Jun 17th 2016 CVX 95 Call
- 60 days to expiration
- Bid 5.85, Mid 5.93, Ask 6.00 for the call
- Debit is 6.00 at the ask price, which is where you typically purchase single-leg options.
- Maximum potential loss: 6.00
- Maximum potential gain is unlimited in theory
- Total commission to enter this trade at TradeKing is $5.60
Brian’s Second Paper Trade - Skip Strike Butterfly Call
- Buy 1 May 06th 2016 CVX 101 Call
- Sell 2 May 06th 2016 CVX 103 Call
- Buy 1 May 06th 2016 CVX 107 Call
- 17 days to expiration
- Net Bid 0.01, Mid 0.18, Ask 0.35 for the strategy
- Net debit is 0.18 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: 2.18
- Maximum potential gain: 1.82
- Total commission to enter this trade at TradeKing is $7.55
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.
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