Quick Takes Pro Market Technician Michael Kahn Analyzes the S&P 500:
SPX was trading at 2,057.52 at the time of analysis, up 13.80 on the day. SPX continues to surprise investors as the rally we’ve been watching since early February ran into some trouble within the last two weeks. For those on the bearish side, Michael points out that SPX hasn’t set a higher high since the 4th quarter of 2015, however, he also points out that there are bullish signs as well. While the rally has faltered some, a bullish flag pattern appears to be emerging in the chart. The pattern is a bit congested, but if a breakout from the flag pattern occurs, it could be a bullish sign.
Michael Kahn’s Chart of the Day: Verizon Communications Inc. (VZ):
Verizon Communications Inc. was trading around the $53.025 level during the time of analysis, just above its 50-day moving average of $52.58. Verizon has had a good year so far with the beginning of the year seeing a strong reversal followed by a very sharp rally. However VZ has since gapped down twice with a downside breakaway gap occurring last week with large volume on that move. VZ is now sitting on its 50-day moving average but, Michael warns it’s more of a speed bump than a support. Looking at the indicators, before the breakdown there were many bearish signals as well like bearish divergence was present in RSI and a lack of movement in on-bounce volume. As far as Michael can tell, he believes the party for VZ is over. He now anticipates that Verizon may continue to trade between $45 and $54.25.
TradeKing “Options Guy” Brian Overby Analyzes Verizon Communications Inc.’s Volatility & Dividends:
Verizon.’s 30-day Implied Volatility (IV) has seen a small spike, but overall VZ’s volatility is rather low.
Verizon Communications Inc.pays quarterly dividends and its next earnings announcement is anticipated to be on 04/21/16.
Brian Overby Shares VZ Paper-Trading Strategies:
Brian’s first paper trade was a Back Spread with Puts, a speculative trade that’s looking for more volatility than what the marketplace is implying from the pending earnings announcement. His second paper trade is a Long Put Spread with the purchased put in-the-money.
Brian’s First Paper Trade - Back Spread with Puts
- Buy 2 Apr 22nd 2016 VZ 52 Put- Sell 1 Apr 22nd 2016 VZ 53.50 Put
- 10 days to expiration
- Net Bid 0.18, Mid 0.22, Ask 0.25 for the strategy
- Net credit is 0.22 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: 1.28
- Maximum potential gain: 0.22
- Total commission to enter this trade at TradeKing is $6.90
Brian’s Second Paper Trade - Long Put Spread
- Buy 1 Apr 29th 2016 VZ 53 Put- Sell 1 Apr 29th 2016 VZ 51 Put
- 17 days to expiration
- Net Bid 0.83, Mid 0.89, Ask 0.94 for the strategy
- Net debit is 0.89 if we get it at the mid-price, though note this is not always possible
- Maximum potential loss: 0.89
- Maximum potential gain: 1.11
- 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.
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