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Options Trading

TradeKing Midday Market Call Recap - $SPX & $SPLS

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Analysisof S&P 500 from Michael Kahn with QuickTakesPro:

S&P 500 (SPX) – At the time of broadcast, the S&P 500 was tradingaround 2091.05, just below its 50 day moving average of 2103.82 and above the200 day moving average of 2048.71. The index has been relatively flat thisyear, and Michael mentions that it’s “one of the narrowest first halves onrecord.” Greece rumors and the potential interest rate increase the Fed isconsidering may have caused some of the recent fluctuations, but overall themarket has remained sideways.

TheChart of the Day is American Airlines (AAL):

American Airlines went through a rally late last year, stabilized duringQ1 of 2015 and has now broken down. The stock was trading at 39.55 at the timeof analysis, below both its 50 day moving average (46.24) and 200 day movingaverage (46.07). Michael draws the moving average death cross where the 50 daymoving average dips below the 200 day moving average which signals theimmediate term has crossed below the long-term trend. He set his bearishbreakdown target at about 35.50 if the breakdown occurs.

Analysisof AAL Volatility Chart and Dividends from TradeKing’s BrianOverby:

American Airlines’ 30-day Implied Volatility (IV) is 37.19% and the30-day Historical is 42.77%. The company’s next earnings report is anticipatedto be announced later this summer on July 23, 2015. American Airlines lastex-dividend date was April 30, 2015 and paid $0.10 per share.

Note: Brian’s paper trades do not use options that will be affected byupcoming earnings announcements or dividend payments.

BrianOverby’s AAL paper trade strategies based on Michael’s analysis:

Brian’s first paper trade was a Short Call Spread based on the stock’s volatility and Michael’sbearish analysis. The second paper trade was a Long Put, a few points out-of-the-money.

Brian’sFirst Paper Trade - ShortCall Spread

- Buy 1 June 26th 2015 AAL 43.00 Call

- Sell 1 June 26th 2015 AAL 41.00 Call

- 10 days to expiration

- Net Bid 0.33 credit, Mid 0.35 credit, Ask 0.37 credit for the strategy

- Net Credit is 0.35 if we get it at the mid, though note this is notalways possible

- Maximum potential loss: $1.65 (difference in strike prices minus creditreceived)

- Maximum potential gain: $0.35 (credit received for putting on thetrade)

- Total commission to enter this trade is $6.25

Brian’sSecond Paper Trade - LongPut

- Buy 1 July 17th 2015 AAL 38.00 Put

- 31 days to expiration

- Bid 0.95, Ask 0.98 for the put

- Debit is 0.98 if we get it at the ask

- Maximum potential loss: $0.98

- Maximum potential gain: There’s a substantial profit potential. If thestock goes to zero you make the entire strike price minus the cost of the putcontract. Keep in mind, however, stocks usually don’t go to zero.

- Total commission to enter this trade is $5.60

**NOTE: option prices are given as a per contract amount. Multiply loss andgain figures by 100 shares and by the number of contracts traded to determinethe amount of the full potential loss or full potential gain. No additionalcalculations are needed to determine commission costs.

TradeKingOptions Tools used:

- Detailed AAL Quote

- Short Call Spread

- Long Put

- TradeKingVolatility Charts

- TradeKingOptions Pricing Calculator

- TradeKingProbability Calculator

- TradeKingP&L Calculator

Want solid market analysis andpotential trading ideas? Join Michael and Brian, as they analyze the market duringthis live online session. As an added bonus, a stock chart will be covered indetail each session accompanied by a potential option trade. The event is everyTuesday and begins at 12:00pm ET.

Registerhere for next week’s Midday Market Call!


Brandon Wilson

TradeKing Group, Inc.

Options involve risks and are notsuitable for all investors. Prior to buying or selling options, an investormust receive a copy of Characteristics and Risks of Standardized Options, sentto you in previous communication. Additional copies may be obtained by callingTRADEKING at 877-495-KING or by visiting

Multiple leg options strategiesinvolve additionalrisks, and may result in complex tax treatments. Please consult a taxadvisor.

At the time of publication and inthe preceding month, TradeKing and/or Michael Kahn did not have ownershipgreater than 1% in any stocks mentioned; did not have any other actual,material conflict of interest known at the time of publication; have notreceived compensation from a public offering nor from investment bankingservices related to any companies mentioned within the past 12 months, norexpect to receive any in the next 3 months; nor engaged in market making in thesecurities mentioned.

System response and access timesmay vary due to market conditions, system performance, and other factors.

Any strategies discussed andexamples using actual securities and price data are strictly for illustrativeand educational purposes only and are not to be construed as an endorsement,recommendation, or solicitation to buy or sell securities. Past performance isnot a guarantee of future results. Consider the following when making aninvestment decision: your financial situation, your risk profile andtransaction costs.

Market timing is a complexinvestment strategy which involves risk and may incur additional commissioncosts.

While implied volatilityrepresents the consensus of the marketplace as to the future level of stockprice volatility, there is no guarantee that this forecast will be correct.

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