TradeKing Midday Market Call Recap: SPX, VIX, FITB
Recap for Tuesday, July 31 by Kevin Corrigan
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Analysis from Candlechart.com’s Dave Forster:
S&P 500 (SPX) – at the time of this broadcast, SPX was around 1,385 down about .30 from Monday (intraday chart below). After a strong couple days, it looks like it is consolidated at the top. Looks like it will hang around there as investors await the results of the current Fed meeting.
Discussion from TradeKing Options Analyst Brian Overby:
VIX – at the time of this broadcast, VIX was about 18.03, flat from yesterday. It’s still surprisingly low considering it is still earnings season and the August and September contracts point to higher levels. August future level is 19.45, heavy call volume last Friday in for the August 22 and 23 strike contracts drove august future quite a bit higher relative to the further out in time future contracts.
Dave Forster’s Chart of the Day is Fifth Third Bank – symbol FITB
Fifth Third Bank symbol FITB - At the time of this broadcast, FITB was 14.02, flat from yesterday (intraday chart below). Looks like it hit its resistance level around 14.40 after a 5 day run up and has dropped since.
There has been unusual options activity for this stock. There were 10,000 Jan 15 puts bought and 10,000 Jan 12.5 puts sold to build a Bear Put Spread.
A lot will have to do with any Fed announcement, but overall this stock could be in a longer term bearish pattern. It has minor support around 13.40, major support at 13. It is probably too soon for August contracts for any significant movement, maybe look at the September expiration.
- Support / resistance
- Moving Averages
Brian Overby’s potential strategy based on Dave’s chart – FITB – Long Spread
Since this is a lower price stock, puts will also likely be priced lower. The thinking is, since FITB is around a $14 stock, it only has 14 points to move down. Therefore, the premiums and pricing should be lower than a high priced stock which could have more downside potential.
Earnings are not coming out until October, so we don’t have to be concerned with that if we are looking at a September expiration. Since earnings aren’t until October, both the 30-day historical volatility and the implied volatility levels are fairly low. Both are around 25%.
FITB – Conservative Bearish Strategy - Long Put
You may choose to use this strategy if you expect a bearish move by September expiration.
- Buy 1 FITB Sept 15 Put
- Bid 1.24, Ask 1.27
- 53 days until expiration
- Total debit is $1.27 if pay the asking price
- Maximum potential loss is $1.27 if stock price is above 15 at September expiration.
- Maximum potential gain is technically unlimited but highly unlikely
- Commission to enter this trade is $5.60
FITB – Speculative Bearish Strategy - Long Put
You may choose to use this strategy if you expect a bearish move by September expiration. Also, if you want to buy more contracts, the 14 put is about half the price of the 15.
- Buy >1 FITB Sept 14 Put
- Bid .59, Ask .62
- 53 days until expiration
- Total debit is $.62 if pay the asking price
- Maximum potential loss is $0.62/per contract if stock price is above 14 at September expiration.
- Maximum potential gain is is technically unlimited but highly unlikely
- Commission to enter this trade is $5.60
**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 costs.
TradeKing Options Tools used:
- TradeKing Live
- Detailed Quote / Earnings Calendar
- TradeKing Long Put
- TradeKing Volatility Charts
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At the time of publication and in the preceding month, TradeKing and/or Michael Kahn did not have ownership greater than 1% in any stocks mentioned; did not have any other actual, material conflict of interest known at the time of publication; have not received compensation from a public offering nor from investment banking services related to any companies mentioned within the past 12 months, nor expect to receive any in the next 3 months; nor engaged in market making in the securities mentioned.
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