Quad Witching September Expiration Open Interest

Last week I outlined some levels I thought we may reach. SPX exceeded those expectations to close at 1687.99 up 2%. Headed into this week my thesis will be of caution. After riding the market up from 1630, it’s much more difficult to stay long with size. That is not to say I will be shorting the market. Instead I will continue to look to individual stocks and keep my position size small until I see a more lengthy consolidation or a dip that I can buy.  I continue to hear bears harping about all the divergences in the market. I am not going to argue that they do not exist; however, we have seen similar divergences all year that tease bears only to then rip higher. Until I see price breach significant support I don’t see a reason to be short.

The all important Fed meeting is next week and the big question is will we see tapering? To me, that is the wrong question. The question is how will the markets react to whatever news we get. Even if I knew whether we would get tapering or not, I still wouldn’t know how to position myself in front of the meeting. So instead I will wait to see what trend takes place once the news is digested. For next week look for levels of resistance at 1696, 1700 and the all time high of 1709. On the downside, look for support at 1679, and 1670. If we close below 1670 I think it would be prudent to take a step back and wait before buying any dips.

One other thing I will be keeping in mind that when the VIX expires during the same week as monthly options Wednesday through Friday tend to be bearish. You can find that information here from Ryan Detrick of Schaeffer’s Investment.

Open Interest:
Keep in mind that many of these options were bought a long time ago because this is monthly expiration. This week is also quad witching expiration. If you don’t know what that is you can read about if here.

SPY – not much to take away from this. 165 is the highest puts and 170 the highest calls. Be aware that if 167 breaks, delta hedging may take place because of the volume in the 167 and 166 puts and we could fall to 165 easily. See here for an explanation of why.

AAPL The highest OI obviously stands out at 500, but remember most of these were bought over a long span of time. So the focus in terms of high call OI is probably better to be on the 470 and 480’s.


AMZN The last two weeks it has been acting better, but I don’t really have interest in it until it convincingly gets over 300. Three hundred and five is the highest open interest and this week may be another range bound type of consolidation week.

BIDU – Stock looks fine to me and I think will go higher by year end, but I think that the 150 technical level along with high open interest may make this another consolidation week.

CMG – It’s certainly been making an effort and seems like it’s ready to push higher. It closed a little above 425 (new 52 week high) on Friday, which I consider very bullish. I would love to see it keep pushing higher next week because when it does get a lot of buying volume OI doesn’t matter. But without that, OI almost always dominates. So if you see weakness don’t be surprised to see this close near or below 415.

FB – Another stock that has been holding up well. Forty five has been strong resistance and there is a decent amount of volume sitting at that 45 strike. There is even more at the 46 strike so good chance this week could see a minor pullback or consolidation.


GOOG – I don’t look to OI for GOOG and rarely trade the stock, but for those that ask for it, here it is.

LNKD – Last couple days LNKD has been abnormally weak. It did fall below its 10 day MA on Friday, but was able to close above it. Next week will hopefully give us better clues as to whether it will keep its uptrend in tack or it it will be taking a break. Two fifty is the highest call OI and 230 for puts.

MA – This turned out to be a much better trade than I had anticipated. It made all time highs on Thursday and put in an inside day on Friday. This could really use some time to consolidate and allow the 10 and 20 day to catch up a bit. There is high OI calls at 660 and 670. I would like to see 656 hold this week, but keep in mind MA is thinly traded and can consolidate in a fairly large range.

NFLX – I hear a lot of people talking about a double top, but to me it still looks fine. I see no reason to short it until there is a reason to (other than what you think valuation should be). Three hundred would actually be a great pin for this week. Either way, I presume it will remain range bound this week as it continues to consolidate recent gains and gets used to the 300 hat.

PCLN – Similar to LNKD this quickly dipped below its 10 day MA on Friday, but closed above. You want to see 960 hold or it may need more time to digest being in the 900’s before making a run for 1000.

TSLA – It is sandwiched between the 10 and 20 day MA (the latter being good support support so far this year). The highest put OI is at 160 which aligns nicely with the 20 day at 161.68. High open interest calls sit at 170 and 175.

V – It has been doing a good job making a comeback since its announcement of being added to the DJIA.  I really liked how it acted on Friday and it closed above 185 and 188 resistance. I don’t love seeing such high call OI at 180, but unless you start to see this really pullback, I wouldn’t pay attention to it.

Good luck this week….It will be nice to get “the most important Fed meeting” over with.

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