Quick TakesPro Market Technician Michael Kahn Analyzes the S&P 500:
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SPX was tradingat 1,945.53 up 28.31 on the day. Michael thinks the end of the bull market isofficial. As its 50-day moving average (2054.29) continues to drop below its200-day (2072.40) moving average, the validity of a moving average “deathcross” has strengthened and this is seems to be happening in a lot of the majorindexes. So we have a major trend line that was broken and a few support levelsthat were broken. The market is now starting to form a wedge pattern that isleaning to the bear side.
MichaelKahn’s Chart of the Day: Netflix (NFLX):
Netflix wastrading around the 96 level during the time of analysis, below its 50-daymoving average of 109.08. Michael pointed out a bearish head and shoulderspattern that formed recently and the steady decline in on balance volume (OBV).The stock is overcooked after their good earnings announcement recently.Michael thinks the first area of support is around 79 and if it can breakthrough that it may go down as low as 71-72 range.
TradeKing“Options Guy” Brian Overby Analyzes Netflix Volatility & Dividends:
NFLX’s 30-dayImplied Volatility (IV) and 30-day Historical Volatility have spiked in thelast two weeks, similar to the market as a whole. The big spike up above the70% IV number was even higher than the 30-day IV was before its last earningsreport.
Netflix doesnot pay a dividend currently and the next earnings announcement should beannounced in mid-October.
Brian OverbyShares NFLX Paper-Trading Strategies:
Brian’s firstpaper trade was a Short Call Spread which is a neutral to bearish forecast. He is hoping to sell some volatility based on Michael’s analysis, withthe goal of closing out the position before expiration. His second paper tradeis a Long Put Spread, which is a little more speculativebecause he used a shorter term expiration and the strategy is looking for thestock to reach Michael’s Netflix in the low 70s with a.
Brian’sFirst Paper Trade - Short Call Spread
- Buy 1September 18th 2015 NFLX 104 Call
- Sell 1September 18th 2015 NFLX 102 Call
- 10 days toexpiration
- Net Bid .058,Mid 0.64, Ask 0.69 for the strategy
- Net credit is0.64 if we get it at the mid-price, though note this is not always possible
- Maximumpotential loss: $1.36
- Maximumpotential gain: $0.64
- Totalcommission to enter this trade at TradeKing is $6.25
Brian’sSecond Paper Trade - Long Butterfly with Puts
- Buy 1 October9th 2015 NFLX 75 Put
- Sell 2October 9th 2015 NFLX 85 Put
- Buy 1 October9th 2015 NFLX 95 Put
- 31 days toexpiration
- Net Bid .84,Mid 1.57, Ask 2.30 for this strategy
- Net Debit is1.57 if we get it at the mid-price, though note this is not always possible
- Maximumpotential loss: $1.57
- Maximumpotential gain: $8.43
- Totalcommission to enter this trade at TradeKing is $7.55
Important notes: option prices are given as a per-contract amount.Multiply loss and gain figures by 100 shares and by the number of contractstraded to determine the amount of the full potential loss or full potentialgain. No additional calculations are needed to determine commission costs.
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