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.
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:
- Fig Leaf
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.