TradeKing Midday Market Call Recap: DJI VIX, KO

Recap for Tuesday, August 14th by Kevin Corrigan

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Analysis from Quick Takes Pro’s Michael Kahn:

Dow Jones (DJI) - at the time of this broadcast, the Dow was around 13,211 up about 42 points. It looks to be near the resistance levels off its recent high. Looks to be about 1% above the current market. Over the past 6 days, the market has been in a very tight range. It is grinding higher, but probably not a full blown rally. As the market edged higher, there’s been low volume.
 


Discussion from TradeKing Options Analyst, Brian Overby:

VIX – at the time of this broadcast, VIX was about 14.32, up about 0.52 from yesterday. It is hitting its historical lows. It even dropped below 14 recently. Looks like the overall market is complacent and not moving a lot.
 


Michael Kahn’s Chart of the Day is Coca Cola – symbol KO

Coca Cola - symbol KO - At the time of this broadcast, KO was 39.40, up about .11 from yesterday. It is a stock that has gapped up recently, but has pulled back a bit today. Both long term and shorter term trendlines have been headed up. It has been performing well out of a recent correction and it appears to be coming out of that correction.
 


Technical tools used:

- Support / resistance
- Trendlines
- Moving Averages

Brian Overby’s potential strategy based on Michael’s chart – KO – Long Call

KO - Coca Cola is not a huge mover and its historical and implied volatilities are fairly low. A fairly simple possibility to consider with low volatility is the Long Call. To potentially benefit from a small pop in the stock price (target Michael mentioned was around 40.50), we could look to find something in-the-money with a fairly high delta. The September 37.5 call has a Delta 0.86. This means the options should closely follow the stock as it moves up or down.

KO – Possible Conservative Strategy - Long Call

- Buy 1 KO Sep 37.50 Call (market was Bid 2.00, Ask 2.07)
- 39 days until expiration
- Total net debit is 2.07 if we take the Ask.

- Maximum potential loss is the debit paid of $2.07

- Maximum potential gain is unlimited if KO goes to infinity (which of course is unlikely)
- Total commission to enter this trade is $5.60

KO – Possible Speculative Strategy - Long Call

- Buy 1 KO Sep 38.75 Call (market was Bid 0.99, Ask 1.02)
- 39 days until expiration
- Total net debit is 1.02 if we take the Ask.

- Maximum potential loss is the debit paid of $1.02

- Maximum potential gain is unlimited if KO goes to infinity (which of course is unlikely)

- Total 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 Call
- TradeKing Volatility Charts

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Regards,
Kevin Corrigan
VP Content and Social Media
www.tradeking.com

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