TradeKing Midday Market Call Recap: SPX, VIX, BKS, MMM

TK All-Star posted on 09/26/12 at 02:25 PM

Recap for Tuesday, September 25 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 1,461.86 up about 5 from Monday’s close. The SPX has been kind of quiet lately. It has been defying the “September Seasonal” where usually, the month of September is not a particularly good month for the SPX. It has been drifting down over the past week. This is not unusual because there is another “Jewish Holiday Seasonal” pattern that tends to head down from Rosh Hashanah to Yom Kippur.

Analysis on DJI:

Dow Jones Industrial Average (DJI) - at the time of this broadcast, DJI was around 13,585.48 up about 26 from Monday’s close. After QE3 was announced the DJI hit a new high for the year. It has been going sideways since in a tight channel. It is well above its 50 and 200 day moving averages of about 13,167.82 and 12,837.62 respectively. Overall the market has been in a rising trend.

Discussion from TradeKing Options Analyst Brian Overby:

VIX – at the time of this broadcast, CBOE Volatility Index (VIX) was about 14.28 up about 0.13 from yesterday. The VIX has been very boring lately. Although it has pulled back up a bit off its recent lows, it is still well below its 100 and 200 day moving averages. One thing to note is yesterday there was a lot more call buying than put buying in the VIX options, about 188k calls vs. 33k puts with the largest open interest positions showing up in on the out-of-the money calls in October and November.  September and October traditionally are volatile months in the market. This has not proven to be the case so far in September, but it seems with the VIX near yearly lows traders seem to be positioning for a potential spike in the VIX within October/November time frame.

Brian recently blogged about what to know when trading VIX options here.

Quick Take Pro Chart of the Day is Barnes and Noble - (BKS)

Discussion from QuickTakesPro’s Michael Kahn -  At the time of this broadcast, BKS was 12.80  up about .07 from yesterday. The reason why Michael chose this was the bullish RSI divergence near support and the fact it was coming off its lowest lows. It looked like it could be a bullish day for BKS and it started off that way. Being that it pulled back, and the options are fairly illiquid, we are not going to use this chart for possible trades.

Trading illiquid options is one of Brian’s Top Ten Option Trading Mistakes.

Alternative Quick Take Pro Chart of the Day is 3M - (MMM)

Discussion from QuickTakesPro’s Michael Kahn - at the time of this broadcast, MMM was trading at about 93.65 There is a lot going on with this chart. The stock is trading above both its 50 day and 200 day moving averages of 91.67 and 87.71 respectively, as well as its actual trendline (in purple, also around 91.67). However, it is bumping up against resistance levels of around 94. On the upside if it does break through that, the target could be around 98. 98 was a resistance previously hit around April and in July. On the downside, we see a trendline close to the 50 day moving average, we see it on the chart around 91.90 area. If we can break down through that level we may have even a larger move to the downside. So we are kind of in a wait and see mode for the short term.

Technical tools used:

Support / resistance
- Trendlines
- Moving Averages

Brian Overby’s possible short term strategy based on Michael’s chart – MMM – Long Straddle

Both the Historical and Implied Volatilities are near their lows near its year lows around 14% to 15% respectively. MMM is also scheduled to announce earnings in late October. Since we are in a low volatility environment and if a stock move in either direction could happen, we are going to look at a long straddle. This is a speculative trade because we have to be mindful of how much time we have until expiration and we don’t see the move in a one to two week period it would wise to close out the trade and move on.

Possible Speculative Strategy - Long Straddle

- Buy 1 MMM Oct 95 Put (Just In The Money)
- Buy 1 MMM Oct 95 Call (Just Out of the Money)
- Bid 2.86, Mid 2.90, Ask 2.95
- 25 Days to Expiration
- Total net debit is 2.95 if we take the Ask

- Maximum potential loss is the debit paid of 2.95 (if the stock closes at 95 on expiration).

- Maximum potential gain is is theoretically unlimited if the stock goes up to infinity. If the stock goes down, potential profit may be substantial but limited to the strike price minus the net debit paid (95 - 2.90 = 92.01) neither of these cases are likely to happen.

- Total commission to enter this trade is $6.25

If we follow Michael's final advice and do the wait and see approach, we would be waiting for MMM to break through the trendline either to the upside (94.00) or the one on the downside (91.90). The alternative trade considering the low implied volatility environment would be to just buy an individual call or put outright.

Possible alternative trade - Long Close-to-the-Money Put or Call depending on price move

Buy a call or put with a strike price close to the current stock price.
The expiration would be either the October or November depending on when the trendline was broken.

- Maximum potential loss is the debit paid for the call or put
- Maximum potential gain for a long call is theoretically unlimited profit potential, if the stock goes to infinity. (Please note: We’ve never seen a stock go to infinity. Sorry.)
- Maximum potential gain for a long put is substantial. If the stock goes to zero you make the entire strike price minus the cost of the put contract. (Keep in mind, however, stocks usually don’t go to zero.)

- 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 Straddle
- TradeKing Long Put
- TradeKing Long Call
- 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:

Kevin Corrigan
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

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

Posted by TK All-Star on 09/26/12 at 02:25 PM


You must Log In to post to this blog.

Not a member? Register Now to …

  • See what other traders are doing
  • Make your own trades public
  • Share your thoughts on a trade
  • Join or start a group
  • Connect with like-minded traders