October OPEX

Last week here I showed the open interest for both Wednesday and Friday expiration and wrote that after two closes over the high calls it was likely that SPX would take some time to consolidate and was unlikely to close over the high calls again. SPX consolidated in a very strong tight range and indeed was able to pin for both Wednesday and Friday.

Open Interest:

SPY-W: (45 of 57 pin since Wednesday expiration inception).* As of now only the 254 call strike sticks out. If we open above that level then as I said a couple weeks ago it’s not something you necessarily want to fight as it can easily continue to rally (especially in this market). However, if we open below that level or stall near there too long then it will increase the chances we close at or below 254 by Wednesday expiration. 

SPY-F: (35 of 51 pins since I began tracking Friday’s).* For Friday’s expiration the level of calls that are most relevant are 254 & 255. If SPY opens and stays above 255 there aren’t many higher calls to prevent it from rallying further. However, anything below there and price might easily get pulled down below the 254 calls. The obvious pin that sticks out is 250 (and that can happen) however, as I’ve said many times before, the obvious pin on monthly OPEX rarely works. Thus, unless real weakness creeps into the market it’s probably not a great idea to aim for a pin of 250.

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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 10/11: Successful pin. 

Friday 10/13: Successful pin. 

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