TradeKing Midday Market Call Recap - $SPX, $URI

TK All-Star posted on 07/14/16 at 05:37 PM

Featuring @BrianOverby  &  @MNKahn




Quick Takes Pro Market Technician Michael Kahn Analyzes the S&P 500:


S&P 500 index (SPX) was trading at 2,153.83 at the time of analysis, up 16.67 on the day. Big news this week is that the SPX reached an all time high yesterday and the rally is continuing today. Michael points out that we have had a very sharp move in a short time frame. There are lots of reasons to worry, but the bottom line is that the actual price trumps all. It’s tough to explain the rally logically. One red flag is that the index is getting quite a bit above the 200-day moving average, indicating that the market is getting a little stretched out. The Dow Transport index is a bit away from a new high; Dow theory states that a bull market is the strongest when the transports lead the way. Michael thinks these are a couple of good reasons to be skeptical of the most recent rally.




Michael Kahn’s Chart of the Day: United Rentals, Inc


United Rentals, Inc was trading around the 70.38 level during the time of analysis, above its 50-day moving average of 66.76 and above the 200-day moving average of 64.51. The moving averages have loosely provided some support and the stock seems to be trying to break out from the flag pattern. We do have a rising trend in On Balance Volume (OBV), which is also a positive sign.




TradeKing “Options Guy” Brian Overby Analyzes United Rentals, Inc  - Volatility & Dividends:


URI’s 30-day Implied Volatility (IV) is in the higher end of the yearly range at around 50%. Most likely it is being caused by the fact they are anticipated to be announcing earnings on 7/20/16.


URI does not currently pay a dividend.



Brian Overby Shares URI Paper-Trading Strategies:

Brian’s first paper trade was a Diagonal Spread with Calls, a bullish trade with an lower overall cost compared to just buying a call outright. The second paper trade is a neutral-to-bullish Short Put Spread.


Brian’s First Paper Trade - Diagonal Spread with Calls


- Buy 1 Jul 22nd 2016 URI 72 Call

- Sell 1 Jul 15th 2016 URI 71 Call


- 17 days to expiration and

- 3 days to expiration.


- Net Bid 1.30, Mid 1.50, Ask 1.70 for the strategy

- Net Debit is 1.50 if we get it at the mid-price; note that this is not always possible


- Maximum potential loss: 1.50

- Maximum potential gain: The gain is limited to the premium received for the back-month (Jul 22nd) call minus the cost to buy back the front-month (Jul 15th) call, minus the net debit paid to establish the position. It is not defined because the price of the back-month call will be dependent on market conditions at the expiration of the front month option.


- Total commission to enter this trade at TradeKing is $6.25


Brian’s Second Paper Trade - Short Put Spread.


- Buy 1 Aug 19th 2016 URI  65.00 Put
- Sell 1 Aug 19th 2016 URI 62.50 Put


-  38 days to expiration


- Net Bid .15, Mid 0.45, Ask 0.75 for the strategy

- Net Credit is 0.45 if we get it at the mid-price; note that this is not always possible


- Maximum potential loss: 2.05

- Maximum potential gain: 0.45


- 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.


TradeKing Options Tools used:

- TradeKing Volatility Charts

- TradeKing Options Pricing Calculator

- TradeKing Probability Calculator

- TradeKing P&L Calculator


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.


Multiple leg options strategies involve additional risks, and may result in complex tax treatments. Please consult a tax advisor.


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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Posted by TK All-Star on 07/14/16 at 05:37 PM

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