Recap for Tuesday, September 2nd by Kevin Corrigan
Analysis of S&P 500 from
Michael Kahn -
The Chart of the Day is Starwood Hotels (HOT) -
Analysis of HOT Volatility Chart and Dividends from TradeKing’s Brian Overby -
Technical Tools Used:
Brian Overby’s paper trade strategies based on Michael’s analysis - Michael's analysis is bullish. Brian discusses two strategies, a shorter term Back Spread with Calls and a longer term Long Call. Earnings is after the October expirations, however, the dividend goes ex tomorrow and will adjust the options prices. Brian mentioned that, especially with the back spread, it is important to wait until the open tomorrow before considering the paper trade. The sale of an in-the-money call is at risk of being assigned early with an overnight dividend looming. Because tomorrow is the ex-dividend date, the prices on the open tomorrow are likely to be different than the prices used in the examples below.
Brian’s Paper Trade - Back Spread with Calls - Sell 1 Sep 20 2014 HOT 82.50 Call- Buy 2 Sep 20 2014 HOT 85 Call- 18 Days to expiration- Net Bid 0.67, Mid 0.71, Ask 0.76 for the Spread - Net Credit is $0.71, if we execute at the Mid (might not be possible).
- Keep in mind the stock price will be adjusted for the dividend tomorrow.- Maximum potential loss: $1.79- Maximum potential gain to the upside is unlimited if the stock goes to infinity (not likely to happen)Total commission to enter this trade is $6.25Brian’s Paper Trade - Long Call- Buy 1 Oct 18 2014 HOT 109.00- 46 Days to expiration- Bid 1.31, Ask 1.63 for the call- Debit is $1.63- Keep in mind the stock price will be adjusted for the dividend tomorrow.- Maximum potential loss: $1.63- Maximum potential gain is unlimited if the stock goes to infinity (not likely to happen)Total commission to enter this trade is $5.60
**NOTE: 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 Quote
- TradeKing Options Pricing Calculator- TradeKing P&L CalculatorGet solid market analysis and potential trading ideas. Take 15 minutes of your lunch with our team, as they analyze the market during this live online session. As an added bonus, a stock chart will be covered in detail each session accompanied by a potential option trade. This might be the most valuable thing you do all week! Every Tuesday midday from 12:00 - 12:15pm ET.
Don’t miss the next TradeKing Midday Market Call. Register here: https://www.tradeking.com/education/live-events
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 Webinars. 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.(c) 2014 TradeKing Group, Inc. All rights reserved.