TradeKing Midday Market Call Recap - $SPX & $DIS

Featuring @BrianOverby  &  @MNKahn

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

SPX was trading at 2,092.88, up 9.95 on the day. Michael thinks bull trendline is still broken with lots of resistance being present on the upside. He pointed to an article in MarketWatch by candlestick expert Steve Nison indicating there were engulfing lines present at the reversals in May, August, and November. An engulfing line is a bearish reversal signal that occurs when a stock closes up, has a small jump at the next day’s open, then closes below the previous day’s trading range. Michael didn’t personally see the first two engulfing lines, but he does trust Nison as the candlestick expert when he indicated they were there. At this point, Michael thinks there’s still plenty of overhead resistance which could prove a risky move if you’re looking to acquire new positions going into the new year.

Michael Kahn’s Chart of the Day: Walt Disney Co. (DIS):

Walt Disney, Co. was trading around the 114.34 level during the time of analysis, above its 50-day moving average of 110.71. Looking back, DIS saw a huge run-up into August followed by a gap down with big volume. It has since had a strong rally through October and November, but hit a snag at the end of the month with a dark cloud cover candle emerging. This intraday reversal occurs when a stock hits a new high then ends up closing down for the day and is usually a good indication that you’re seeing the end of a trend. Michael also points out that momentum has fallen and regardless of Disney currently sitting at a support, a further breakdown could happen at any time.

TradeKing “Options Guy” Brian Overby Analyzes General Walt Disney Co.’s Volatility & Dividends:

Walt Disney Co.’s 30-day Implied Volatility (IV) saw a jump following some negative news earlier this week about their ESPN sports channel and is currently quite a bit above the historical volatility,

Walt Disney Co. pays semi-annual dividends with their last ex-dividend date being 07/01/2015 with a 1.15% dividend yield. Their next earnings announcement is anticipated to be on or around 02/02/2016.

Brian Overby Shares DIS Paper-Trading Strategies:

Brian’s first paper trade is a Short Call Spread, a bearish strategy. His second paper trade is a Long Put Spread, also a bearish strategy. Because the 30-day IV is in the higher end of the range, Brian picked these two strategies specifically because they have a short option as one of the legs.

Brian’s First Paper Trade - Short Call Spread

- Buy 1 Jan 15th 2016 DIS 125 Call

- Sell 1 Jan 15th 2016 DIS 120 Call

- 45 days to expiration

- Net Bid 0.92, Mid 0.98, Ask 1.04 for the strategy

- Net credit is 0.98 if we get it at the mid-price, though note this is not always possible

- Maximum potential loss: $4.02

- Maximum potential gain: $0.98

- Total commission to enter this trade at TradeKing is $6.25

Brian’s First Paper Trade - Long Put Spread

- Buy 1 Dec 18th 2015 DIS 117 Put

- Sell 1 Dec 18th 2015 DIS 112 Put

- 18 days to expiration

- Net Bid 2.10, Mid 2.23,  Ask 2.36 for the strategy

- Net debit is 2.23 if we get it at the mid-price, though note this is not always possible

- Maximum potential loss: $2.23

- Maximum potential gain: $2.77

- 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 DIS Quote

- Short Call Spread

- Long Put Spread

- TradeKing Volatility Charts

- TradeKing Options Pricing Calculator

- TradeKing Probability Calculator

- TradeKing P&L Calculator

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