Continue Reading Below
Quick Takes Pro Market Technician Michael Kahn Analyzes the S&P 500:
SPX was trading at 2,088.85 at the time of analysis, down 0.99 on the day. The rally in SPX has continued with Michael pointing to a consolidation that occurred in March followed by additional bullish momentum. That momentum is now slowing with SPX approaching a huge area of resistance where we’ve historically seen a lot of peaks, congestion, and areas where supply has overwhelmed demand. We’re also seeing a slowing of indicators, specifically with RSI slowing down. Should SPX continue on a bullish run, it will be very difficult to get through this resistance.
Michael Kahn’s Chart of the Day: Valero Energy Corporation (VLO):
Continue Reading Below
Valero Energy Corporation was trading around the $61.55 level during the time of analysis, below its 50-day moving average of $63.19. VLO is currently seeing what Michael describes as a short-term breakout. With it still under both the 50-day moving average and the 200-day, Michael indicates it may not be great for the big picture, but he has plenty of reason to remain bullish. The pullback we recently saw reversed when it hit the trendline with a bullish reversal bar being present last week and On Balance Volume (OBV) has been trending upward, regardless of the static in the price movements. Michael believes this should help push the stock higher. He expects it’s on the verge of making a move higher with a long term bullish outlook as the short term trend appears to have broken to the upside. Michael expects next level of resistance will be present around $65.
TradeKing “Options Guy” Brian Overby Analyzes Valero Energy Corporation’s Volatility & Dividends:
Valero Energy Corporation’s 30-day Implied Volatility (IV) is approaching its 6-month low, even with earnings approaching early next month.
Valero Energy last paid a dividend on February 5th or 60 cents or dividend yield of
3.89% its next earnings announcement is anticipated to be before the open of the market on 05/03/16.
Brian Overby Shares VLO Paper-Trading Strategies:
Brian’s first paper trade was a Long Calendar Call Spread. He is using out-of-the-money calls to put a little bit of a bullish spin on a normally neutral strategy. His second paper trade is a Long Call Spread using a further out expiration.
Brian’s First Paper Trade - Long Calendar Call Spread
- Sell 1 Apr 29th 2016 VLO 63 Call
- Buy 1 May 6th 2016 VLO 63 Call
- April 29th has 3 days and May 6th has 10 days to expiration
- Net Bid 0.57, Mid 0.62, Ask 0.66 for the strategy
- Net Debit is 0.62 if we get it at the mid-price, though note this is not always possible.
- Maximum potential loss: 0.62
- Maximum potential gain is limited to the premium received for the back-month call minus the cost to buy back the front-month call, minus the net debit paid to establish the position. NOTE: You can’t precisely calculate your risk at initiation of this strategy, because it depends on how the back-month call performs at the first expiration date.
- Total commission to enter this trade at TradeKing is $6.25
Brian’s Second Paper Trade - Long Call Spread
- Buy 1 May 20th 2016 VLO 60 Call
- Sell 1 May 20th 2016 VLO 63 Call
- 24 days to expiration
- Net Bid 1.55, Mid 1.67, Ask 1.79 for the strategy
- Net debit is 1.67 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: 1.67
- Maximum potential gain: 1.33
- 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:
Options involve risks and are not suitable for all investors. Prior to buying or selling options, an investor must receive a copy of Characteristics and Risks of Standardized Options, sent to you in previous communication. Additional copies may be obtained by calling TRADEKING at 877-495-KING or by visiting www.TradeKing.com/ODD.
Multiple leg options strategies involve additional risks, and may result in complex tax treatments. Please consult a tax advisor.
At the time of publication and in the preceding month, TradeKing and/or Michael Kahn did not have ownership greater than 1% in any stocks mentioned; did not have any other actual, material conflict of interest known at the time of publication; have not received compensation from a public offering nor from investment banking services related to any companies mentioned within the past 12 months, nor expect to receive any in the next 3 months; nor engaged in market making in the securities mentioned.
System response and access times may vary due to market conditions, system performance, and other factors.
Any strategies discussed and examples using actual securities and price data are strictly for illustrative and educational purposes only and are not to be construed as an endorsement, recommendation, or solicitation to buy or sell securities. Past performance is not a guarantee of future results. Consider the following when making an investment decision: your financial situation, your risk profile and transaction costs.
Market timing is a complex investment strategy which involves risk and may incur additional commission costs.
While implied volatility represents the consensus of the marketplace as to the future level of stock price volatility, there is no guarantee that this forecast will be correct.
TradeKing charges $4.95 for online equity and option trades, add 65 cents per option contract. TradeKing charges an additional $0.35 per contract on certain index products where the exchange charges fees. See our FAQ for details. TradeKing adds $0.01 per share on the entire order for stocks priced less than $2.00. See our Commissions + Fees page for commissions on broker-assisted trades, low-priced stocks, option spreads, and other securities.
The projections or other information generated by TradeKing's tools regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. The calculations do not take into consideration all costs, such as commissions and margin interest which may impact the results shown. It is the user's sole responsibility to select the criteria to enter in the TradeKing's tools, or to choose among the predefined screens, and to evaluate the merits and risks associated with the use of the tools before making any investment decisions. TradeKing is not responsible for any losses that occur from such investment decisions.
TradeKing Webcasts and All-Star Blog are provided for educational and informational purposes only.
All investments involve risk, losses may exceed the principal invested, and the past performance of a security, industry, sector, market, or financial product does not guarantee future results or returns. TradeKing provides self-directed investors with discount brokerage services, and does not make recommendations or offer investment, financial, legal or tax advice. You alone are responsible for evaluating the merits and risks associated with the use of TradeKing's systems, services or products.
TradeKing selects and defines as All-Stars certain independent market commentators who are recognized industry personalities and experienced traders and who provide timely market commentary via the TradeKing All-Star Blog and/or TradeKing Webcasts. Each All-Star commentator's bio, related qualifications and disclosure as to their relationship with TradeKing can be found on the All-Star Roster. The selection of All-Star commentators is solely based on the quality and style of the content provided. TradeKing does not measure, endorse, or monitor the performance or correctness of any statement or recommendation made by independent All-Stars commentators. Supporting documentation for any claims made by TradeKing All-Stars will be supplied upon request by the author of the post, who is solely responsible for the views expressed. Contact TradeKing All-Stars by sending an email message to TKallstars@tradeking.com.
© 2016 TradeKing Group, Inc. All rights reserved.FINRA SIPC