TradeKing Midday Market Call Recap - $SPX & $SHAK

TK All-Star posted on 07/20/16 at 01:48 PM

Featuring @BrianOverby  &  @MNKahn

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

S&P 500 index (SPX) was trading at 2,159.93 at the time of analysis, down 6.96 on the day. The index had a big week last week, breaking out to new all-time highs. Michael pointed out that it has been 14 months since the old high-water mark was set. This is usually a good sign for the markets, but Michael still has his reservations. One red flag is that the index is getting quite a bit above the 200-day moving average because of the straight up move it has made recently, indicating that the market is getting a little stretched out. Overall volume of the markets has been dwindling into this rally, which is not good overall. Lastly, Michael points out that the banking sector is still lagging behind the SPX index. Despite this strong recent market rally, the banking index (BKX) is still not back to the level before the Brexit announcement. It’s not a good sign that this major sector is doing relatively poorly.

Michael Kahn’s Chart of the Day: Shake Shack Inc.

Shake Shack, Inc. was trading around the 39.04 level up 50 cents on the day during the time of analysis. The stock has been in a sideways pattern since the beginning of the summer and appears to be breaking out of the upside resistance level of the channel. We do have a rising trend in On Balance Volume (OBV), which is also a positive sign.

TradeKing “Options Guy” Brian Overby Analyzes Shake Shack, Inc. - Volatility & Dividends:

SHAK’s 30-day Implied Volatility (IV) has settled down since their Initial Public Offering (IPO) last year. With that said, it still is a volatile stock trading around 54%. The company is anticipated to announce earnings on August 8th.

SHAK does not currently pay a dividend.

Brian Overby Shares SHAK Paper-Trading Strategies:

Brian’s first paper trade was a Long calendar spread with calls, a bullish trade with an lower overall cost compared to just buying a call outright. The second paper trade is a bullish Long Call Spread.

Brian’s First Paper Trade - Long calendar spread with calls

- Buy 1 Aug 12th, 2016 SHAK 42 Call

- Sell 1 Aug  5th,  2016 SHAK 42 Call

- 24 days to expiration and

- 17 days to expiration.

- Net Bid 0.30, Mid 0.60, Ask 0.85 for the strategy

- Net Debit is 0.60 if we get it at the mid-price; note that this is not always possible

- Maximum potential loss: 0.60

- Maximum potential gain: The gain is limited to the premium received for the back-month (Aug 12th) call minus the cost to buy back the front-month (Aug 5th) 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 - Long Call Spread.

- Buy 1 Aug 17th 2016 SHAK  39.00 Call
- Sell 1 Aug 12th 2016 SHAK  42.00 Call

-  17 days to expiration

- Net Bid .70, Mid 1.05, Ask 1.35 for the strategy

- Net debit is 1.05 if we get it at the mid-price; note that this is not always possible

- Maximum potential loss: 1.05

- Maximum potential gain: 1.95

- 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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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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Posted by TK All-Star on 07/20/16 at 01:48 PM


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