Premium Level Open Interest Strategy for Week 6/05/17

Please note that open interest often changes during the week when a stock has a big move. This provides a great starting point, but it would be up to you to continue to track it throughout the week if you are trading one of these names. If it’s an earnings name, the chart will be updated the day after the report comes out. The technical levels should remain fairly consistent. If you did want updates and real time trade alerts then consider becoming a full premium member. Finally, news items trumps open interest.

Open Interest:

SPY-W: (30 of 38 pins). The obvious level of resistance is 245 and not far away from where SPY closed. SPY closed over its high calls on Friday which tends to lead to continued strength, so if price gets over 245 and doesn’t look back than delta hedging may push it higher even faster. However, if SPY stays below that level or stalls near it and those calls remain open, then price is very likely to close at or below 245 on Wednesday. The current best pin is 242.5 and there is very little put support should SPY break lower. 

SPY-F: (24 of 32 pin). The obvious thing that sticks out is the best pin at 240. I have said this before, but to reiterate, the very obvious pin with one strike having more calls and puts than any other has a poor track record for working. However, should the market sell off fairly hard (perhaps because of the Comey testimony, or the ES futures roll or just because), it’s worth noting that could become a magnet. To the upside there is small resistance at 246, but not much else.  

AAPL: Based on how AAPL closed on Friday, it does appear that it will continue higher as WWDC gets going. On any pullback we want to see 154.5 hold or it may end up back near the 152 area. Anything over Friday’s high likely targets the all time high of 156.65 and then possibly 158, 159 and 162. If you don’t already have calls then a pullback to 154.5 would be a great entry if it came. If not then over Friday’s high might work, but of course that carries a bit more risk.

OI: The highest calls and what may act as resistance is 157.5. If AAPL can push over that level and hold then there is currently no other resistance in the way. 

AMZN: On Friday it was able to get over 1,000, but it faced too much call resistance beginning at 1,007. This might continue higher next week, but premiums are so high at the beginning of the week it’s risky to chase right out of the gate. Pullbacks though are a gift. I will be looking to possibly get long on a pullback to 1,001 or maybe 991-993 depending on how its trading next week. AAPL is supposed to announce a competitor to the AMZN echo. Although that news is not new it could provide the pullback I’m looking for to jump into calls.

OI: The current best pin is around 1,000 but it’s not yet very prominent. There is some small call resistance at 1,010 and then much stronger resistance at 1,020. A large rally early in the week can shift the calls, but the longer it stalls the harder it will be for AMZN to get over the high calls because more will probably be added. 

BIDU: Total dud last week. For now I am not interested in playing this name until it can get and prove it can hold above 193. Maybe that happens next week or maybe in 6 months, but it’s not worth playing until it does. Currently it’s hanging around a range of roughly 183 to 193. Until that definitively breaks, I think it’s better to put our concentration elsewhere.

OI: The current best pin is around 187, but this can easily shift as there isn’t many contracts open. I think if BIDU can push and hold over 193 then it can easily also push over the high calls at 195. Should it drop below 197 then there is no put support till 177. 

FB: This was a tease early in the week only to rip late Friday. It closed at all time highs and will likely continue next week and at least get to the 155 level. Depending on the momentum (and if it can get over its high calls) it could see 159. I will have this on my radar, but it will really need to have a strong presence and be able to push over 155 because its slow moving nature lately doesn’t make option plays worth it. Bulls don’t want to see it back under 152 next week.

OI: The open interest seems to look the same every week, with 152 and 155 having high calls. Eventually FB will be able to push through them and rally and that rally will likely continue for a week or more. With all the other momentum stocks making new highs it could happen sooner rather than later, but until FB can really push past those high calls with momentum, it will continue to be a slow and hard trading vehicle. If FB gaps over 155 on any particular day I would likely buy calls near the open that day.

GOOGL: It has yet to hit that 1,000 mark, but since it’s just a few steps behind AMZN, it very likely happens next week. A pullback to 993 would  be a good place to buy calls if that level comes. Under that level and it may be headed back to the 980 level. If it doesn’t pull back then it may just go straight through its high of 999 with a first target of 1,007/1,008, similar to where AMZN stopped. I will have my eye on this for calls early next week depending on how it opens.

OI: 985, 990 and 1,000 are all the areas with high call strikes; however, the volume on each strike is fairly low and I wouldn’t put much meaning into them at this point. If GOOGL remains over 995 then I definitely think it at leasts tests 1,000. If it can hold above that level, then there is nothing stopping it from rallying much higher. GS: It FINALLY filled that gap that I’ve been talking about for months. Since then it has struggled to gain footing, but I do think financials are starting to shape up a bit and perhaps will rally in the coming weeks due to the anticipated June rate hike. With that said, the first level it needs to push through is 216. Between 209 and 216 is no mans land and below 209 would target 205 and 200 (at the moment I don’t think we see those levels). Above 216 should get it back to 220 and possibly 222. Targets above there include 224, 227 and 231 (maybe not all in one week). As I have been saying for months, once GS gets and holds over 233 it will be back to its all time highs in no time.

OI: The current best pin is right where GS needs to get over to rally. There is good put support under 212 and a bit of call resistance at 217. Thus, 216 is the technical level GS needs to push through and then 217 if it’s really going to get to those above targets. 

NFLX: Similar to FB, NFLX was just a tease all week and then ripped into the close. Also similar to FB, this has been very difficult to trade because it takes one step forward and then one, or 1.5 or .75 step(s) back. Perhaps next week will be different since many of the other momo stocks have been moving well, but that remains to be seen. Similar to FB, I will have my eye on it, but will have to wait and see if it’s worth getting a position knowing it often fails after making a slight new high. On any pullback, 164 should hold if it’s going to rally. If it gets back under 164 then it’s back in a tight range and not worth trading. If it gets a lot of momentum behind it then it can see 169, and 171.

OI: The current best pin is near 165 with more puts than calls and good support at 162. The calls can easily be pushed through if momentum takes over and especially if NFLX opens and stays over 165. If it falls back under that level and stalls then more calls will likely be added making it more difficult for NFLX to rally.

TSLA: After such a large rally I wouldn’t be surprised to see this pause in a range next week. Areas of support on any pullback are 336, 331 and 327 (that would be a great area to buy calls if it came). The all time high is 344 and over that level may push it to 348 or 350, but I would be hesitant to chase it if it got there early in the week especially if premiums are high. I would prefer to look for dip buy opportunities.

OI: The current best pin is around 340, but there is a large range from 327 to 350/355 that it could trade in without put support or call resistance.