Recap for Tuesday, September 16th by Kevin Corrigan
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Analysis of S&P 500 from
Michael Kahn -
The Chart of the Day is Micron Technology Inc. (MU) -
Analysis of MU 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 was bullish, but MU had a big run up today so Brian discusses a conservative long term Short Put Spread paper trade that will include earnings and a short term, more speculative Long Calendar Call Spread paper trade surrounding the earnings announcement. The short option expires before the anticipated announcement and the long option expires after the event. Brian’s Paper Trade - Short Put Spread (longer term more conservative)- Sell 1 Oct 18 2014 MU 28 Put- Buy 1 Oct 18 2014 MU 26 Put- 32 Days to expiration- Net Bid 0.29, Mid 0.30, Ask 0.32 for the strategy- Net Credit is $0.30 if it filled at the Mid (May not be possible)- Maximum potential loss: $1.70- Maximum potential gain is $0.30Total commission to enter this trade is $6.25Brian’s Paper Trade - Long Calendar Call Spread (shorter term more speculative)- Sell 1 Sep 20 2014 32 Call- Buy 1 Sep 26 2014 32 Call- 4 Days to expiration for the September 20th, 10 days for the September 26th- Net Bid 0.75, Mid 78, Ask 0.80 for the strategy- Net Debit is $0.78 if it gets executed at the Mid (May not be possible)- Maximum potential loss: $0.78- 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 max gain at initiation of this strategy because it depends on how the back-month call performs.Total commission to enter this trade is $6.25**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 costsTradeKing Options Tools used:
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