TradeKing Midday Market Call Recap: SPX, VIX, NAV
Recap for Tuesday, January 8th by Kevin Corrigan
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Analysis of S&P 500 and Nasdaq Composite from QuickTakesPro’s Michael Kahn:
S&P 500 (SPX) – At the time of this broadcast, SPX was around 1454.22, down about 7.67 from Monday’s close. The SPX has recently hit its highest levels since 2007. Right now the big question is whether that is a positive sign or a new level of resistance. We could be in a wait-and-see period, according to Michael. It has rebounded from the levels it dropped to with the whole the fiscal cliff uncertainty. It is above both the 50 and 200 day moving averages of 1413.61 and 1391.77, respectively.
In other news: The Nasdaq chart doesn’t have a whole lot of new information. It is not at its highs. The Russell 2000 is at all time high levels, might be a “January effect” rally in the small caps.
Analysis of Volatility Index from TradeKing’s Brian Overby:
S&P 500 Volatility (VIX) - is around 14.14, up about .35 today. The VIX recently had one of its largest collapses on a percentage basis in its history. It dropped from its pre-fiscal-cliff high of about 24. It is back to about its 5 year lows. It is also below the 50 and 100 day moving averages of 16.83 and 16.19, respectively.
The February contracts are about 16.70 and March is 18.27. So, there could be higher volatility going forward now that we enter earnings season and a new debt ceiling fight in Washington.
To learn more about trading VIX option contracts, check out Brian’s blog here.
Stock for the day is Navistar International Corporation (NAV)
Discussion from QuickTakesPro’s Michael Kahn - At the time of this broadcast, NAV was $22.96 up about .62 on the day. It appears to have a resistance level of near 26.25. It is between its 50 day, 200 day moving averages of around 20.67 and 25.75. It looks to be in a rounded bottom formation and repairing itself from recent lows.
Technical tools used:
- Moving Averages
Brian Overby’s less speculative strategy based on Michael’s Analysis – Long Call Spread
Since Navistar appears to be stabilized and in a rounded bottom pattern from its recent lows, we will look at a neutral to bullish trade. Both its implied and historical volatilities are both just above 40% and it since they recently released earnings, this level could be interpreted as low expectation of any major news coming out in its near future.
Possible Trade - Long Call Spread
- Sell 1 Feb 16th NAV 26 Call
- Buy 1 Feb 16th NAV 23 Call
- 39 days to expiration
- Net Bid .90, Ask 1.10, Mid 1.00
- Total net debit is 1.10 if we can get filled at the Ask.
- Maximum potential loss is $1.10
- Maximum potential gain is $1.90
- Total commission to enter this trade is $6.25
Possible More Speculative Trade - Long Call
- Buy 1 Jan 19th NAV 21 Call
- 11 days to expiration
- Net Bid 2.05, Ask 2.15
- Total debit is 2.15 if we can get filled at the Ask.
- Maximum potential loss is $2.15
- Maximum potential gain is Unlimited if the stock goes to infinity. (Not going to happen)
- 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:
- Detailed Quote
- TradeKing Long Call Spread
- TradeKing Long Call
- 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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