TradeKing Midday Market Call Recap - $SPX & $AAPL

Markets TradeKing

Featuring @BrianOverby  &  @MNKahn

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

SPX was trading at 2,060.65 at the time of analysis, down 16.53 on the day. The rally we’ve been watching hit a bit of a snag today, with SPX seeing a sell-off. Michael believes this should only be a small, short-term sell-off pointing to SPX still being pretty high relative to it’s 52-week range. There’s also a lot of of overhead resistance present that the rally ran right into and looking at RSI, momentum waned leading into the pullback as well. We’ll continue to watch SPX to see if this is just a short-term move.

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Michael Kahn’s Chart of the Day: Apple Inc. (AAPL):

Apple Inc. was trading around the $94.02 level during the time of analysis, below its 50-day moving average of $106.17. Looking back at recent activity Michael points to a test of the trendline on the upside with a successful breakout followed by a gap-down failure as tech collapsed in April. That was then followed by another gap-down at earnings with APPL landing on the support level that was established earlier in the year. Michael’s quick to point that the broad market is still closer to the top of the rally, while AAPL is at the bottom and looking at RSI, AAPL is oversold. He believes this is due to panicky trading as it’s still below both the 50 and 200-day moving averages. Is it a good bet? Michael believes it may be, due to the support level it’s currently sitting on and that the stock is considered to be in an oversold state.

TradeKing “Options Guy” Brian Overby Analyzes Apple Inc.’s Volatility & Dividends:

Apple Inc.’s 30-day Implied Volatility (IV) is near the 6 month lows on the IV chart.  

Apple Inc. pays quarterly dividends and its next earnings announcement is anticipated to be on 07/19/16.

Brian Overby Shares AAPL Paper-Trading Strategies:

Brian’s first paper trade was to buy a LEAPS In-the-Money Call as a stock substitute, a more conservative longer-term strategy. His second paper trade is a Fig Leaf where you sell a short-term call to help generate income to help pay for the long-term LEAPS option contract.

Brian’s First Paper Trade - Buying LEAPS Calls as a Stock Substitute


- Buy 1 Jan 20th 2017 AAPL 80 Call

- 262 days to expiration

- Bid 16.90, Mid 17.00, Ask 17.10 for the CAll

- Debit is 17.00 if we get it at the mid-price, though note this is not always possible.

- Maximum potential loss: 17.00

- Maximum potential gain is theoretically unlimited.

- Total commission to enter this trade at TradeKing is $5.60

Brian’s Second Paper Trade - Fig Leaf


- Buy 1 Jan 20th 2017 AAPL 80 Call
- Sell 1 May 20th 2016 AAPL 97 Call

- Jan 20th 2017 has 262 days and May 20th has 17 days to expiration

- Net Bid 16.08, Mid 16.19, Ask 16.29 for the strategy

- Net debit is 16.19 if we get it at the mid-price, though note this is not always possible

- Maximum potential loss: 16.19

- 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

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 AAPL Quote

- Buying LEAPS calls as a Stock Substitute

- Fig Leaf

- TradeKing Volatility Charts

- TradeKing Options Pricing Calculator

- TradeKing Probability Calculator

- TradeKing P&L Calculator

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