Continue Reading Below
Analysisof S&P 500 from Michael Kahn with QuickTakesPro:
S&P 500 (SPX) – At the time of broadcast, the S&P 500 was tradingaround 2091.05, just below its 50 day moving average of 2103.82 and above the200 day moving average of 2048.71. The index has been relatively flat thisyear, and Michael mentions that it’s “one of the narrowest first halves onrecord.” Greece rumors and the potential interest rate increase the Fed isconsidering may have caused some of the recent fluctuations, but overall themarket has remained sideways.
TheChart of the Day is American Airlines (AAL):
American Airlines went through a rally late last year, stabilized duringQ1 of 2015 and has now broken down. The stock was trading at 39.55 at the timeof analysis, below both its 50 day moving average (46.24) and 200 day movingaverage (46.07). Michael draws the moving average death cross where the 50 daymoving average dips below the 200 day moving average which signals theimmediate term has crossed below the long-term trend. He set his bearishbreakdown target at about 35.50 if the breakdown occurs.
Analysisof AAL Volatility Chart and Dividends from TradeKing’s BrianOverby:
American Airlines’ 30-day Implied Volatility (IV) is 37.19% and the30-day Historical is 42.77%. The company’s next earnings report is anticipatedto be announced later this summer on July 23, 2015. American Airlines lastex-dividend date was April 30, 2015 and paid $0.10 per share.
Note: Brian’s paper trades do not use options that will be affected byupcoming earnings announcements or dividend payments.
Brian Overby’s AAL paper trade strategies based on Michael’sanalysis:
Brian’s First Paper Trade - ShortCall Spread
- Buy 1 June 26th 2015 AAL 43.00 Call
- Sell 1 June 26th 2015 AAL 41.00 Call
- 10 days to expiration
- Net Bid 0.33 credit, Mid 0.35 credit,Ask 0.37 credit for the strategy
- Net Credit is 0.35 if we get it at themid, though note this is not always possible
- Maximum potential loss: $1.65(difference in strike prices minus credit received)
- Maximum potential gain: $0.35 (creditreceived for putting on the trade)
- Total commission to enter this tradeis $6.25
Brian’s Second Paper Trade - LongPut
- Buy 1 July 17th 2015 AAL 38.00 Put
- 31 days to expiration
- Bid 0.95, Ask 0.98 for the put
- Debit is 0.98 if we get it at the ask
- Maximum potential loss: $0.98
- Maximum potential gain: There’s asubstantial profit potential. If the stock goes to zero you make the entirestrike price minus the cost of the put contract. Keep in mind, however, stocksusually don’t go to zero.
- Total commission to enter this tradeis $5.60
**NOTE: option prices are given as a per contract amount. Multiply loss andgain figures by 100 shares and by the number of contracts traded to determinethe amount of the full potential loss or full potential gain. No additionalcalculations are needed to determine commission costs.
TradeKing Options Tools used:
- Long Put
Wantsolid market analysis and potential trading ideas? Join Michael and Brian, asthey analyze the market during this live online session. As an added bonus, astock chart will be covered in detail each session accompanied by a potentialoption trade. The event is every Tuesday and begins at 12:00pm ET.
Register here for next week’s Midday MarketCall!
Optionsinvolve risks and are not suitable for all investors. Prior to buying orselling options, an investor must receive a copy of Characteristics and Risksof Standardized Options, sent to you in previous communication. Additionalcopies may be obtained by calling TRADEKING at 877-495-KING or by visiting www.TradeKing.com/ODD.
Multipleleg options strategies involve additionalrisks, and may result in complex tax treatments. Please consult a taxadvisor.
At thetime of publication and in the preceding month, TradeKing and/or Michael Kahndid not have ownership greater than 1% in any stocks mentioned; did not have anyother actual, material conflict of interest known at the time of publication;have not received compensation from a public offering nor from investmentbanking 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 inthe securities mentioned.
Systemresponse and access times may vary due to market conditions, systemperformance, and other factors.
Anystrategies discussed and examples using actual securities and price data arestrictly for illustrative and educational purposes only and are not to beconstrued as an endorsement, recommendation, or solicitation to buy or sellsecurities. Past performance is not a guarantee of future results. Consider thefollowing when making an investment decision: your financial situation, yourrisk profile and transaction costs.
Markettiming is a complex investment strategy which involves risk and may incuradditional commission costs.
Whileimplied volatility represents the consensus of the marketplace as to the futurelevel of stock price volatility, there is no guarantee that this forecast willbe correct.
TradeKingcharges $4.95 for online equity and option trades, add 65 cents per optioncontract. TradeKing charges an additional $0.35 per contract on certain indexproducts where the exchange charges fees. See our FAQ for details. TradeKingadds $0.01 per share on the entire order for stocks priced less than $2.00. Seeour Commissions + Fees page forcommissions on broker-assisted trades, low-priced stocks, option spreads, andother securities.
Theprojections or other information generated by TradeKing's tools regarding thelikelihood of various investment outcomes are hypothetical in nature, do notreflect actual investment results and are not guarantees of future results. Thecalculations do not take into consideration all costs, such as commissions andmargin interest which may impact the results shown. It is the user's soleresponsibility to select the criteria to enter in the TradeKing's tools, or tochoose among the predefined screens, and to evaluate the merits and risksassociated with the use of the tools before making any investment decisions.TradeKing is not responsible for any losses that occur from such investmentdecisions.
TradeKingWebinars and All-Star Blogs are provided for educational and informationalpurposes only.
All investments involve risk, losses may exceed the principalinvested, and the past performance of a security, industry, sector, market, orfinancial product does not guarantee future results or returns. TradeKingprovides self-directed investors with discount brokerage services, and does notmake recommendations or offer investment, financial, legal or tax advice. Youalone are responsible for evaluating the merits and risks associated with theuse of TradeKing's systems, services or products.
TradeKingselects and defines as All-Stars certain independent market commentators whoare recognized industry personalities and experienced traders and who providetimely market commentary via the TradeKingAll-Star Blog and/or TradeKing Webinars. EachAll-Star commentator's bio, related qualifications and disclosure as to theirrelationship with TradeKing can be found on the All-StarRoster. The selection of All-Star commentators is solely based on thequality and style of the content provided. TradeKing does not measure, endorse,or monitor the performance or correctness of any statement or recommendationmade by independent All-Stars commentators. Supporting documentation for anyclaims made by TradeKing All-Stars will be supplied upon request by the authorof the post, who is solely responsible for the views expressed. ContactTradeKing All-Stars by sending an email message to TKallstars@tradeking.com.
? 2015 TradeKing Group, Inc. All rights reserved.