August OPEX

Last week here I showed both the SPY Wednesday and Friday expiration. I pointed out the very good put support for Wednesday and the call resistance (248). I also pointed out that there was pretty much no put support for Friday. If you weren’t suspicious of the Tuesday morning up move  (which blew through the high calls) then maybe you should subscribe to my service as we were fully on top of it.

(of course I have to show you all that I did notice my mis-usage of the word tale 😃)

Furthermore we were prepared to not fall for the market rise on Tuesday as I wrote this as part of my weekend report to members.

Finally, we also didn’t get sucked into the bounce on Wednesday afternoon and remained short, which led to nice gains Thursday.

Sassy Thoughts: The market is definitely oversold based on 2017 standards (see below for example); however, when taken in perspective by including other years it can easily still get more oversold (I don’t have control over the x-axis and this is just for perspective so please don’t ask me why the x-axis is different). Obviously the M.O. of 2017 is we immediately bounce and perhaps never look back. However, based on what I see I don’t yet believe the lows are  in. Furthermore, the close on Friday could lead to a gap down Monday.

Same breadth measure, 2 perspectives:

  • SPX 52-week lows (1 year view): 
  • SPX 52-week lows (2 year perspective): 

Open Interest:

SPY-W: (39 of 48 pins since Wednesday expiration inception)* Taken at face value the best pin is currently 245. There are high puts at 245 and 244. SPY closed Friday at 244.12. If price opens below 244 and doesn’t quickly push back over the high puts then it increases the chance it won’t just stall but instead continue lower. The same can be said if price opens above 244 or 245, but then falls below and doesn’t very quickly recover. Should price open at or above 245 and continue higher there is no call resistance till 248. Should price not stay within the 244 to 245 range this open interest can easily shift before Wednesday expiation. 

SPY:F: (31 of 42 pins since I began tracking Fridays)* Recall that this is a monthly open interest graph where calls and puts were bought or sold over a longer period of time and thus, tend to shift less throughout the week. With that said, extreme volatility does indeed shift even monthlies. Taken at face value the current best pin is around 244/245. Similar to what I said above, if price opens below or in between the high puts (245, 244, 243 and 242) and can’t quickly recover then it will increase the chance of price moving lower and possibly very quickly due to delta hedging. Should price fall below 242 (also a level of technical support) the next large put support is 240. To the upside, if price can get through the high 244 and 245 call strikes the next level of call resistance is 247 and then 249. Opening around 244 or 245 is likely grounds to sit on hands and wait to see how price moves as it’s always possible it remains stuck all week (unlikely, but it’s happened before).

Promotional stuff: If you are a short term trader and have been on the losing side of most trades or just want to learn how to incorporate open interest and technical analysis to trade the overall market and momentum stocks consider joining one of  SassyOptions Premium services.

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Pinning stuff:

*An explanation as to how I define pinning can be found here. More information about what pinning is can be found under the education section of my site.

Wednesday 8/09: Successful pin.

Friday 8/11: Although I didn’t think any pin was really great (and even said so last weekend) I will count this as a failed pin. 

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