Quick Takes Pro Market Technician Michael KahnAnalyzes the S&P 500:
SPX was trading at 1,933.93, down 27.38 on the day. The SPXcontinued to recover up until the Fed meeting with the resistance line beingviolated the day before the announcement followed by a failure the next day.Michael believes the rebound is now over, and the path of least resistance ison the downside.
Michael Kahn’s Chart of the Day: Bristol Meyers Squibb(BMY):
Bristol MeyersSquibb was trading around the 62.11 level during the time of analysis, belowits 50-day moving average of 63.10. Michael believes this stock has had areversal following it’s rally. The pharmacy sector has been weak as of late andBMY obviously has been bucking the sector trend. Even though this stock hadbeen one of the stronger names in pharmaceuticals, Michael believes the bullrun is over for BMY and it will continue to breakdown and should drop furtherwith potential supports at 58.00 and 54.50.
TradeKing “Options Guy” Brian Overby Analyzes BristolMeyers Squibb Volatility & Dividends:
BMY’s 30-dayImplied Volatility (IV) has been climbing recently, most likely because theirearnings announcement is fast approaching. The Q3 earnings is anticipated to be announced on or around October 23,2015.
Bristol MeyersSquibb has an ex-dividend date of September 30, 2015 and is expected to pay ahealthy dividend of around $0.37 per share.
Brian Overby Shares BMY Paper-Trading Strategies:
Brian’s firstpaper trade is a Long Calendar Spread with Puts, which is usually a more neutralstrategy, but will be directional in this case to in fit Michael's forecast.The upcoming dividend will be paid during the strategy’s time frame and hehopes to see an increase in 30-day implied volatility as the earningsannouncement approaches. His second paper trade is a Long Put. This strategy is bearish and can be used when you expect adrop in the underlying stock’s value.
Brian’s First Paper Trade - Long Calendar Spread with Puts
- Sell 1 Oct09th 2015 BMY 60 Put
- Buy 1 Oct23rd 2015 BMY 60 Put
- 17 and 31days to expiration
- Net Bid 0.26,Mid .53, Ask .80 for the strategy
- Net debit is.53 if we get it at the mid-price, though note this is not always possible
- Maximumpotential loss: $0.53
- Maximumpotential gain is limited to the premium received for the back-month call minusthe cost to buy back the front-month call, minus the net debit paid toestablish the position. NOTE: You can’t precisely calculate your max gain atinitiation of this strategy, because it depends on how the back-month callperforms at the front-month call’s expiration date.
- Total commission to enter thistrade at TradeKing is $6.25
Brian’s Second Paper Trade - Long Put
- Buy 1 Oct23rd 2015 BMY 60 Put
- 31 days toexpiration
- Bid 1.80, Ask2.07 for the put
- Debit is 2.07if we get it at the ask-price.
- Maximumpotential loss: $1.80
- Maximumpotential gain: $58.20
- Total commission to enter this trade at TradeKing is $5.60
Important notes: option prices aregiven as a per-contract amount. Multiply loss and gain figures by 100 sharesand by the number of contracts traded to determine the amount of the fullpotential loss or full potential gain. No additional calculations are needed todetermine commission costs.
TradeKingOptions Tools used:
Options involverisks and are not suitable for all investors. Prior to buying or sellingoptions, an investor must receive a copy of Characteristics and Risks ofStandardized Options, sent to you in previous communication. Additional copiesmay be obtained by calling TRADEKING at 877-495-KING or by visiting www.TradeKing.com/ODD.
Multiple legoptions strategies involve additional risks, and may result in complex taxtreatments. Please consult a tax advisor.
At the time ofpublication and in the preceding month, TradeKing and/or Michael Kahn did nothave ownership greater than 1% in any stocks mentioned; did not have any otheractual, material conflict of interest known at the time of publication; havenot received compensation from a public offering nor from investment bankingservices related to any companies mentioned within the past 12 months, norexpect to receive any in the next 3 months; nor engaged in market making in thesecurities mentioned.
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Any strategiesdiscussed and examples using actual securities and price data are strictly forillustrative and educational purposes only and are not to be construed as anendorsement, recommendation, or solicitation to buy or sell securities. Pastperformance is not a guarantee of future results. Consider the following whenmaking an investment decision: your financial situation, your risk profile andtransaction costs.
Market timingis a complex investment strategy which involves risk and may incur additionalcommission costs.
While impliedvolatility represents the consensus of the marketplace as to the future levelof stock price volatility, there is no guarantee that this forecast will becorrect.
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