Midday Market Call Recap by Kevin Corrigan & Brian Overby

Analysis from Quick Takes Pro’s Michael Kahn:

S&P 500 (SPX) – at the time of this broadcast, SPX was around 1,420.15 up 2.02 from Monday’s close. The SPX seems to be in a bullish pattern. It has broken above both the 50 day and 200 day moving averages of about 1331.90 and 1365.30 respectively. It has also broken through a 4 year high resistance level around the 1420. Although, it is in a positive trend, Michael is not sure why we have been on this bullish trend. He thinks it is mainly based on a lot of promises of stimulus and EU pledging to “save the world” recently. The four year high may be a price ceiling, will be interesting to see if it can close above that level today.

Dow Jones (DJI) – at the time of this broadcast, the Dow was around 13,267 down a couple points. Although it is not at historical highs, it looks to be in an area of resistance where investors could be thinking to take profits.

Discussion from TradeKing Options Analyst Brian Overby:

VIX – At the time of this broadcast, VIX was about 14.32, up about 0.30 from yesterday. Not a lot going on here. The market is pretty boring and not a lot of actual volatility happening and the VIX near it’s yearly lows is reflecting that. One interesting things to note is that was a lot of buying in the September 23 and 28 call contracts yesterday suggesting that whoever was buying those expect a much more volatile September. But right now, it is pretty flat and rightfully so.

 

Michael Kahn’s Chart of the Day is Newmont Mining – NEM

Newmont Mining – At the time of this broadcast, NEM was 48.69, up about .56 from yesterday. This is a stock that has taken a big drop off its highs. If we look at possibly retracement levels, we could see a long term level of about 54.31 which is near the 200 moving day average of about 54.49.

Late last month, it looks like it bottomed out and has been moving up since. It just broke through the 50 day moving average of about 47.12 and possibly headed to the 200 day.

Brian Overby’s potential strategy based on Michael’s chart – NEM – Long In-The-Money Call

NEM – Newmont Mining is another stock that doesn’t seem to have a lot going on in terms of volatility. The historical and implied volatility is very close to its yearly low. The Implied is about 25% and the Historical is a bit higher. Looking a longer time frame for this one to play out. More of an investment then swing trade. So we are looking to look at a long term expiration. Keep in mind that Earnings are not until October. When looking to invest we would like the option to act more like that stock, which means we want a higher delta somewhere around .70. .

NEM – Possible Conservative Strategy – Long Call

– Buy 1 NEM Jan 45 (market was Bid 5.50, Ask 5.60)
– 151 days until expiration
– Total net debit is 5.60 if we take the Ask.

– Maximum potential loss is the debit paid of 5.60

– Maximum potential gain is unlimited if NEM goes to infinity (which of course is unlikely)

– Total commission to enter this trade is $5.60

NEM – Possible Speculative Strategy – Long At-The-Money Call

– Buy 1 NEM Jan 48 Call (market was Bid 3.70, Ask 3.80)
– 151 days until expiration
– Total net debit is 3.08 if we take the Ask.

– Maximum potential loss is the debit paid of 3.80

– Maximum potential gain is unlimited if NEM goes to infinity (which of course is unlikely)

– Total commission to enter this trade is $5.60

**NOTE: option prices are given as a per contract amount.

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Kevin Corrigan & Brian Overby
www.tradeking.com