TradeKing Midday Market Call Recap - $SPX & $WFC

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 2,061.60 at the time of analysis, down 3.44 on the day. The overhead resistance has been a tough area to get through and has turned back prices several times since the beginning of last year. It’s off its recent highs, but it hasn’t fallen too far. It appears there may be a potential head and shoulders top pattern at resistance. The 50-day moving average appears in the right shoulder of the pattern which often happens in head and shoulder patterns, but the breakdown hasn’t broken the neckline yet. It was close to breaking two days ago, but SPX has since rebounded for now. We’ll continue to watch SPX to see where it goes.

Michael Kahn’s Chart of the Day: Wells Fargo Corp. (WFC):

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Wells Fargo Corp. was trading around the $47.89 level during the time of analysis, below its 50-day moving average of $49.16. Wells Fargo saw a breakdown today through the low-lows and closing price trendlines. Looking at its performance relative to the SPX, the overall trend is also down with banks underperforming. RSI momentum also appears to be on the weak side. On-bounce volume had been falling, but when the rally occurred at the beginning of the year, that volume really flattened out showing that no money was flowing into the stock. Michael was quick to point out those aren’t good signs and may be evidence of a divergence. It doesn’t appear that the market likes this stock and Michael believes overall WFC is bearish.

   

TradeKing “Options Guy” Brian Overby Analyzes Wells Fargo Corp.’s Volatility & Dividends:

Wells Fargo Corp.’s 30-day Implied Volatility (IV) is currently under its historical volatility with the two being rather close at the moment.  

Wells Fargo Corp. pays quarterly dividends yielding about 3.17% annually and its next earnings announcement is anticipated to be on 07/15/16.

Brian Overby Shares WFC Paper-Trading Strategies:

Brian’s first paper trade was an in-the-money Long Put Option a single-leg bearish option trade. His second paper trade is a Long Put Butterfly Spread that it a time premium positive trade meaning the butterfly is selling more time value than it’s buying. This makes the trade a neutral to bearish strategy.  

Brian’s First Paper Trade - Long Put Option


- Buy 1 Jun 17th 2016 WFC 49 Put

- 31 days to expiration

- Bid 1.62, Mid 1.67, Ask 1.71 for the Put

- Debit is 1.71 if we get it at the ask-price

- Maximum potential loss: 1.71

- Maximum potential gain: 47.29 if the stock went all the way to zero before expiration.

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

Brian’s Second Paper Trade - Long Put Butterfly Spread


- Buy 1 Jun 17th 2017 WFC 49 Put
- Sell 2 Jun 17th 2016 WFC 46 Put

- Buy 1 Jan 20th 2017 WFC 43 Put

- 31 days to expiration

- Net Bid 0.76, Mid 0.84, Ask 0.91 for the strategy

- Net debit is 0.84 if we get it at the mid-price, though note this is not always possible

- Maximum potential loss: 0.84

- Maximum potential gain: 2.16

- 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.

TradeKing Options Tools used:

- Detailed WFC Quote

- Long Put Option

- Long Put Butterfly Spread

- TradeKing Volatility Charts

- TradeKing Options Pricing Calculator

- TradeKing Probability Calculator

- TradeKing P&L Calculator

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