TradeKing Midday Market Call Recap - $SPX & $NOV
Featuring @BrianOverby & @MNKahn
Quick Takes Pro Market Technician Michael Kahn Analyzes the S&P 500:
SPX was trading at 1,998.46, up 11.83 on the day. It’s approaching the resistance level, that was once a major support level, again. While SPX broke that resistance once since last month, it wasn’t able to support itself and crashed back through the resistance level. Michael believes this new move appears to be another small bearish reversal at resistance. The volume over the last 2 trading days has been average, which may be an indicator of an O’Neil follow-through day, but Michael doesn’t believe that to be the case.
Michael Kahn’s Chart of the Day: National Oilwell Varco, Inc. (NOV):
National Oilwell Varco, Inc. was trading around the 40.28 level during the time of analysis, just above its 50-day moving average of 39.55. Michael believes this may be the bottom for a stock, in a sector that has had a rough time recently. There are a number of bull trend indicators that are present - bullish RSI divergence, a rising OBV - but the stock is still well under its 200-day average, indicating that the bull trend hasn’t begun quite yet.
TradeKing “Options Guy” Brian Overby Analyzes National Oilwell Varco Inc.’s Volatility & Dividends:
NOV’s 30-day Implied Volatility (IV) saw a jump in volatility, most likely because the Q3 earnings are anticipated to be announced October 28, 2015.
National Oilwell Varco Inc. pays dividends quarterly, with a most recent ex-dividend date of September 09, 2015 and a 4.55% dividend yield.
Brian Overby Shares NOV Paper-Trading Strategies:
Brian’s paper trades today were to purchase 2 Fig Leafs, a mildly bullish strategy. This strategy acts like a covered call, but uses LEAPS (or longer-term options) as an alternative to buying the underlying stock.
Brian’s First Paper Trade - Fig Leaf #1
- Sell 1 Nov 20th 2015 NOV 42.50 Call
- Buy 1 May 20th 2016 NOV 35 Call
- 45 and 227 days to expiration
- Net Bid 5.98, Mid 6.29, Ask 6.59 for the strategy
- Net debit is 6.29 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: $6.29
- Maximum potential gain is limited to the premium received for sale of the front-month call plus the performance of the back-month call. You can’t precisely calculate potential profit at the initiation of the trade, because it depends on how the back-month call performs.
- Total commission to enter this trade at TradeKing is $6.25
Brian’s Second Paper Trade - Fig Leaf #2
- Sell 1 Nov 20th 2015 NOV 42.50 Call
- Buy 1 Jan 20th 2017 NOV 32.50 Call
- 45 and 472 days to expiration
- Net Bid 8.58, Mid 8.90, Ask 9.24 for the strategy
- Net debit is 8.90 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: $8.90
- Maximum potential gain is limited to the premium received for sale of the front-month call plus the performance of the LEAPS call. You can’t precisely calculate potential profit at the initiation of the trade, because it depends on how the LEAPS call performs.
- 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:
- TradeKing Options Pricing Calculator
- TradeKing Probability Calculator
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