TradeKing Midday Market Call Recap: SPX, VIX, CSCO
Recap for Tuesday, September 18 by Kevin Corrigan
Did you miss Tuesday’s TradeKing Midday Market Call? Here’s a quick recap. Don’t miss another session, register here today!
Analysis on SPX :
S&P 500 (SPX) – at the time of this broadcast, SPX was around 1,459.51 down about 1.68 from Monday’s close. It has recently rallied due to last week’s European Central Bank (ECB) and Fed comments pledging to do whatever it can to save the world economies. We had a true breakout to a new high and then a pause and then another strong up day later in the week. Michael thinks you have to give this trend the benefit of the doubt, even though we are having turmoil in the Middle East and the jobs picture isn’t too rosie. Michael thinks Fed’s announcement of QE3 means more “free money” pushed the market higher.
Discussion from TradeKing Options Analyst Brian Overby:
VIX – at the time of this broadcast, CBOE Volatility Index (VIX) was about 14.29 down about 0.31 from yesterday. There is very little volatility in general in the market even though September and October are typically volatile months. It is still trading well below its 100 and 200 day moving averages. Also, there’s not too much activity in the October options recently despite record volumes in the VIX pit for the month.
Brian recently blogged about what to know when trading VIX options here.
Quick Take Pro Chart of the Day is Cisco - (CSCO)
Discussion from QuickTakesPro’s Michael Kahn - At the time of this broadcast, CSCO was 19.11 down about .05 from yesterday. CSCO has recovered from a significant breakdown over the summer and has been hovering around resistance levels of about 19.75 again. This 19.75 number is significant because it has been a resistance/support level for years with Cisco. The fact that volumes are waning recently leads Michael to believe this resistance level will hold again. If it does start to break down, the next stopping point would be down around the 17.75-18 level. This area on the chart is where the recent gap-up started.
Technical tools used:
- Support / resistance
- Moving Averages
Brian Overby’s possible short term strategy based on Michael’s chart – CSCO – Long Put
Since Michael has a bearish outlook on CSCO, we will look at a possible long just out-of-the-money put. Positive earnings news on CSCO had an effect on both this Historical and Implied Volatilities. The implied volatility dropped near its year lows around 25%. It dropped significantly because it was a price move that was mostly positive. However, Historical Volatility levels have jumped and are around 35%. This could be considered a good volatility picture for buying a long put.
Possible Short Term Strategy - Long Out-of-The-Money Put
- Buy 1 CSCO Oct 19 Put
- Bid .48, Ask .49
- 32 Days to Expiration
- Total debit is .49 if we take the Ask
- Maximum potential loss is the debit paid of .49
- Maximum potential gain is 18.51 if CSCO goes to 0 (but unlikely)
- Total commission to enter this trade is $5.50
Possible alternative trade - Short Term Strategy - Long In-The-Money Put
- Buy 1 CSCO Oct 20 Put
- Bid 1.10, Ask 1.12
- 32 days until expiration on the October
- Total debit is 1.12 if we take the Ask
- Maximum potential loss is the debit paid of 1.12
- Maximum potential gain is 18.88 if CSCO goes to 0 (but unlikely)
- Total commission to enter this trade is $5.50
**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:
- Detailed Quote
- TradeKing Long Put
- TradeKing Volatility Charts
Get solid market analysis and potential trading ideas. Take 15 minutes of your lunch with our team, as they analyze the market during this live online session. As an added bonus, a stock chart will be covered in detail each session accompanied by a potential option trade. This might be the most valuable thing you do all week! Every Tuesday midday from 12:00 - 12:15pm ET.
Don’t miss the next TradeKing Midday Market Call. Register here: www.tradeking.com/events
VP Content and Social Media
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.
Options involve risks and are not suitable for all investors. Prior to buying or selling options, an investor must receive a copy of Characteristics and Risks of Standardized Options, sent to you in previous communication. Additional copies may be obtained by calling TRADEKING at 877-495-KING or by visiting www.TradeKing.com/ODD.
System response and access times may vary due to market conditions, system performance, and other factors.
Multiple leg options strategies involve additional risks and multiple commissions, and may result in complex tax treatments. Please consult a tax advisor.
Any strategies discussed and examples using actual securities and price data are strictly for illustrative and educational purposes only and are not to be construed as an endorsement, recommendation, or solicitation to buy or sell securities. Past performance is not a guarantee of future results. Consider the following when making an investment decision: your financial situation, your risk profile and transaction costs.
Market timing is a complex investment strategy which involves risk and may incur additional commission costs.
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.
TradeKing charges $4.95 for online equity and option trades, add 65 cents per option contract. TradeKing charges an additional $0.35 per contract on certain index products where the exchange charges fees. See our FAQ for details. TradeKing adds $0.01 per share on the entire order for stocks priced less than $2.00. See our Commissions + Fees page for commissions on broker-assisted trades, low-priced stocks, option spreads, and other securities.
The projections or other information generated by TradeKing's tools regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. The calculations do not take into consideration all costs, such as commissions and margin interest which may impact the results shown. It is the user's sole responsibility to select the criteria to enter in the TradeKing's tools, or to choose among the pre-defined screens, and to evaluate the merits and risks associated with the use of the tools before making any investment decisions. TradeKing is not responsible for any losses that occur from such investment decisions.
TradeKing Webinars and All-Star Blogs are provided for educational and informational purposes only. All investments involve risk, losses may exceed the principal invested, and the past performance of a security, industry, sector, market, or financial product does not guarantee future results or returns. TradeKing provides self-directed investors with discount brokerage services, and does not make recommendations or offer investment, financial, legal or tax advice. You alone are responsible for evaluating the merits and risks associated with the use of TradeKing's systems, services or products.
TradeKing selects and defines as All-Stars certain independent market commentators who are recognized industry personalities and experienced traders and who provide timely market commentary via the TradeKing All-Star Blog and/or TradeKing Webinars. Each All-Star commentator's bio, related qualifications and disclosure as to their relationship with TradeKing can be found on the All-Star Roster. The selection of All-Star commentators is solely based on the quality and style of the content provided. TradeKing does not measure, endorse, or monitor the performance or correctness of any statement or recommendation made by independent All-Stars commentators. Supporting documentation for any claims made by TradeKing All-Stars will be supplied upon request by the author of the post, who is solely responsible for the views expressed. Contact TradeKing All-Stars by sending an email message to [email protected].