December OPEX

Last week here I wrote that if SPY could not hold over 265 early in the week it was unlikely to get back over that level until at least after Wednesday expiration because of all the high calls. SPY closed under 265 on Monday and with that came a very small pullback, but SPY didn’t see 265 again till Friday.

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Open Interest:

SPY-W: (49 of 65 pins since Wednesday expiration inception).* Based on Wednesday’s open interest price is unlikely to close above 266 by Wednesday expiration. If it somehow does get over 266 (cause maybe the 266/267 was a call spread) then it would still have to contend with all the 267 calls. In the end, if price does start moving higher early next week it will most likely be an opportunity to short. To the downside there is no put support nearby.

SPY-F: (41 of 59 pins). Although this is a monthly expiration and sometimes those pin less well, this still appears to be more bearish than bullish as there is only call resistance and trivial put support. The call resistance begins at 265 and doesn’t drop off much till after 267. Based on Wednesday’s and Friday’s expiration, any rally early in the week has a very high risk of failing unless the strength can really push through all those strikes and start to shift the open interest. 

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Pinning stuff:

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

Wednesday 12/06: Successful pin.

Friday 12/08: Successful pin. Although price closed over the high calls it remained at 265 the entire day until the last minute on Friday. 

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