TradeKing Midday Market Call Recap - $SPX, $LEN

TK All-Star posted on 09/14/16 at 10:18 AM

TradeKing Midday Market Call Recap - $SPX & $LEN

Featuring @BrianOverby  &  @MNKahn

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

S&P 500 index (SPX) was trading at 2,126.95 at the time of analysis, down 32.09 on the day. The market had a big drop last Friday which caused the index to break out of the very tight Bollinger Bands. The “Bandwidth” was the tightest it has been since the 1980s the only other tighter period Micheal could find was in 1995 when it was that tight of a range for an extended period of time..  So after it officially broke out of the bands the move was big and Michael still thinks the path of least resistance is to the downside. The first support area Michael pointed out over time is around the 2060 level.

Michael Kahn’s Chart of the Day: Lennar Corporation (LEN)

Lennar Corporation was trading at 44.92 down .95 cents on the day during the time of analysis. The stock has broken out of a triangle pattern to the downside closing below its 200 day moving average. Also, the On Balance Volume (OBV) has been in a downward trend while the triangle pattern was developing, which is a negative sign. The next stopping point looks or be around the 44.50 area and if the stock can break through that possible support, then it may even reach the $40 price level.

TradeKing “Options Guy” Brian Overby Analyzes Lennar Corporation (LEN)  - Volatility & Dividends:

LEN’s 30-day Implied Volatility (IV) has risen recently, most likely because of the anticipated earnings announcement on September 20th before the open. It is currently at 28%, which is about 7% higher than the actual 30-day volatility.

LEN does pay a dividend. The yield is 0.36% and the most recent ex-dividend date was on July 6th and the amount was .04 cents per share.

Brian Overby Shares LEN Paper-Trading Strategies:

Brian’s first paper trade was a Long Put Calendar Spread, he is using a shorter expiration for the option contracts and this bearish trade done for a net debit to the account. The second paper trade is a bearish longer term expiration Long Put Spread.

Brian’s First Paper Trade - Long Put Calendar Spread.

- Buy 1 Oct 21st, 2016 LEN 44 Put

- Sell 1 Sep 16th, 2016 LEN 44 Put

- 38 days to October 21st expiration

- 3 days to the September 16th expiration  

- Net Bid 1.06, Mid 1.10, Ask 1.14 for the strategy

- Net debit is 1.10 if we get it at the mid-price; note that this is not always possible

- Maximum potential loss: 1.10

- Maximum potential gain: The gain is limited to the premium received for the back-month (Oct 21st) putl minus the cost to buy back the front-month (Sept 16th) put, 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 - Long Put Spread.

- Buy 1  Oct 21st, 2016 LEN 46 Put

- Sell 1  Oct 21st, 2016 LEN 43 Put

- 38 days to October 21st expiration

- Net Bid 1.21, Mid 1.26, Ask 1.31 for the strategy

- Net debit is 1.31 if we get it at the mid-price; note that this is not always possible

- Maximum potential loss: 1.26

- Maximum potential gain: 1.74

- 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

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Posted by TK All-Star on 09/14/16 at 10:18 AM


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