Open Interest Clues to Next Week

Last week here along with the SPY open interest notes, I shared my thoughts that I did not believe the lows were in yet. The open interest turned out to be very helpful (as it usually is) because when SPY traded above the high calls for Wednesday’s expiration (which happened to also be technical resistance) it provided a great short opportunity. Furthermore, as per Friday’s expiration, the move under 244 later in the week did indeed get a quick move lower and landed at 242.2 before bouncing (I had said would likely get to 242 – so not perfect). Where it pinned Friday was definitely an anomaly, but as I’ve said before, the most obvious pin on monthly OPEX tends to not work well.

By no means was last week easy to navigate; however, if you agreed with my comments that the market would indeed see lower prices and you knew where SPY had call resistance, then you definitely had an edge that you could play. At the very least, if you didn’t want to short, you would have known that chasing price didn’t offer very good risk to reward. Now onto next week (note there will be no public post next week and possibly the week of Labor day weekend – private posts will still be available).

For those that don’t know what kind of information they would get with the Premium Level Strategy Post (which is not my full premium service, but a weekly report) here is an example from last week. If you take the time to read where I mentioned good short opportunities were on several of these momentum stocks and then look at their charts from last week you will likely learn something. They would have been home runs.

Open Interest:

SPY-W: (40 of 49 pins since Wednesday expiration inception).* The current open interest suggests a range from 245 to 247. SPY closed Friday at 242.71. The longer SPY stays under the high 245 puts the less chance it has to get pulled back up by them and thus, might continue lower. However, if SPY opens over 245 or quickly gets over 245 early in the week then in increases the chances that the market will be very still and rangebound between 245 and 247 until Wednesday expiration. There is some minor put support at 242 and 240, but at this point it’s fairly negligible. 

SPY-F: (31 of 43 pins since I began tracking Friday’s).* The current best pin is around 246, but it is not very prominent. For the most part there isn’t much call resistance or put support except for the 240 puts. There is minor call resistance from 249 on and minor put support at 244 and 242, but in general, the only put support I would consider impactful would be the 240 strike.

Promotional stuff: If you are a short term trader and have not been making money 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.

  •  Full premium service includes all day commentary, open interest and technical analysis on ‘in-play’ momentum stocks, and real time trade alerts through my exact entries and exists (meaning I can’t hide behind vague alerts).
  •  Weekly Open Interest and Strategy Post – Open interest and technical analysis for how to trade AAPL, AMZN, BABA, FB, GS, GOOGL, NFLX, TSLA for this coming week. This does not include my private twitter, exact trades or any other updates.

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 8/18: Failed pin to the downside. 

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