Last week here I discussed that the overall trend was still higher, but that bulls needed to “curb their enthusiasm” as there were a lot of open calls that would act as resistance for both the Wednesday and Friday SPY expiration. I then updated that during the week over twitter with the message that bears should also “curb their enthusiasm” as their were lots of puts added that would likely act as support. In a sense, the open interest told the story before it happened.
Also last week in my for purchase weekly Strategy Piece, where I go over the open interest, technicals and trade ideas for several high beta stocks, I discussed the two best looking longs as TSLA and AMZN (both up huge last week) and also included this as my opener:
“Open Interest: Monthly and quarterly inflows can sometimes be large enough to move the market higher early in the week. If that should happen and most of the open interest below does not shift, then the back half of the week will likely see some pullback. In fact, should we see a move higher without much shift in the open interest, I may begin looking to buy puts on a couple momo’s that are over their high calls for a short term move back down. Finally, given the open interest below I think its important to not assume new money flows will send the market higher as things could move back down early on as well.”
Full premium members were able to see in real time how we played that. Wednesday morning, we held back from getting long the momentum stocks and then later in the afternoon bought GOOGL puts which ended up as a huge winner.
Open Interest: I know, this is the part most of you want to read, but sorry I gotta promote myself too :-).
SPY-W: (23 of 30 pins since Wednesday expiration inception).* We have overlapping calls and puts at the moment with a fairly defined range and the current best pin being 235 to 236 (basically right where it closed on Friday). There is decent put support from 232 to 235 and then call resistance from 235 to 238, but the bulk of the latter doesn’t start till 237. Unless SPY stays in a very tight range early next week (which is definitely a possibility) this open interest is likely to shift. For now though, the takeaway is similar to last week in that there is likely not going to be much downside or upside early on in the week (remember the whole “curb your enthusiasm thing” – apply it again). That doesn’t mean individual stocks won’t have large moves btw.
SPY-F: (18 of 25 pins since I began tracking Friday expiration).* Note that although this says SPY-F it is really SPY- T for Thursday. This also has a fairly defined range, but with more wiggle room. The puts begin at 235, but if that doesn’t hold as support (since it’s not that strong yet) then there is no good put support until 232. To the upside, the main call resistance is 238. Over that level and there is plenty of room higher. At this point it can be interpreted that SPY will trade between the 235 to 238 range, which would give it a bit more of a bullish bias since price closed very near the 235 level. If price continues to remain in a tight range early in the week (which the Wednesday expiration currently suggests), the puts and calls surrounding that range will likely get higher increasing the odds that the close on Thursday will remain in that range. However, if price does move below 235 or above 237 early in the week, the open interest might shift enough to produce a different pin range. 
In Sum: Both the Wednesday and Thursday open interest suggest that SPY will continue to trade in a range from roughly 234 to 238. Given that price closed closer to the put support, it’s possible we see the opposite of last week where price spends most of its time closer to the higher end of the range than the bottom. The takeaway then, is once again to curb your enthusiasm both to the upside and downside for next week unless the open interest dramatically shifts.
If it’s going to be a slow week and you need great individual stock ideas plus real time trade alerts come join SassyOptions Premium. Included is all-day market analysis over a private twitter feed. And for those of you high beta momentum (i.e. AAPL, AMZN, FB, GOOGL, TSLA, etc.) traders that want a less hands on approach, you can purchase next weeks weekly Strategy Open Interest Analysis here.
*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 4/5: successful pin.
Friday 4/7: successful pin.
Tags: amzn, day trading, delta hedging, market, max pain, open interest, option trading, options, pinning, S&P 500, SPX, spy, trading, TSLA
A Tight Range with a Slightly Bullish Bias (Says the OI)
Last week here I discussed that the overall trend was still higher, but that bulls needed to “curb their enthusiasm” as there were a lot of open calls that would act as resistance for both the Wednesday and Friday SPY expiration. I then updated that during the week over twitter with the message that bears should also “curb their enthusiasm” as their were lots of puts added that would likely act as support. In a sense, the open interest told the story before it happened.
Also last week in my for purchase weekly Strategy Piece, where I go over the open interest, technicals and trade ideas for several high beta stocks, I discussed the two best looking longs as TSLA and AMZN (both up huge last week) and also included this as my opener:
“Open Interest: Monthly and quarterly inflows can sometimes be large enough to move the market higher early in the week. If that should happen and most of the open interest below does not shift, then the back half of the week will likely see some pullback. In fact, should we see a move higher without much shift in the open interest, I may begin looking to buy puts on a couple momo’s that are over their high calls for a short term move back down. Finally, given the open interest below I think its important to not assume new money flows will send the market higher as things could move back down early on as well.”
Full premium members were able to see in real time how we played that. Wednesday morning, we held back from getting long the momentum stocks and then later in the afternoon bought GOOGL puts which ended up as a huge winner.
Open Interest: I know, this is the part most of you want to read, but sorry I gotta promote myself too :-).
SPY-W: (23 of 30 pins since Wednesday expiration inception).* We have overlapping calls and puts at the moment with a fairly defined range and the current best pin being 235 to 236 (basically right where it closed on Friday). There is decent put support from 232 to 235 and then call resistance from 235 to 238, but the bulk of the latter doesn’t start till 237. Unless SPY stays in a very tight range early next week (which is definitely a possibility) this open interest is likely to shift. For now though, the takeaway is similar to last week in that there is likely not going to be much downside or upside early on in the week (remember the whole “curb your enthusiasm thing” – apply it again). That doesn’t mean individual stocks won’t have large moves btw.
SPY-F: (18 of 25 pins since I began tracking Friday expiration).* Note that although this says SPY-F it is really SPY- T for Thursday. This also has a fairly defined range, but with more wiggle room. The puts begin at 235, but if that doesn’t hold as support (since it’s not that strong yet) then there is no good put support until 232. To the upside, the main call resistance is 238. Over that level and there is plenty of room higher. At this point it can be interpreted that SPY will trade between the 235 to 238 range, which would give it a bit more of a bullish bias since price closed very near the 235 level. If price continues to remain in a tight range early in the week (which the Wednesday expiration currently suggests), the puts and calls surrounding that range will likely get higher increasing the odds that the close on Thursday will remain in that range. However, if price does move below 235 or above 237 early in the week, the open interest might shift enough to produce a different pin range.
In Sum: Both the Wednesday and Thursday open interest suggest that SPY will continue to trade in a range from roughly 234 to 238. Given that price closed closer to the put support, it’s possible we see the opposite of last week where price spends most of its time closer to the higher end of the range than the bottom. The takeaway then, is once again to curb your enthusiasm both to the upside and downside for next week unless the open interest dramatically shifts.
If it’s going to be a slow week and you need great individual stock ideas plus real time trade alerts come join SassyOptions Premium. Included is all-day market analysis over a private twitter feed. And for those of you high beta momentum (i.e. AAPL, AMZN, FB, GOOGL, TSLA, etc.) traders that want a less hands on approach, you can purchase next weeks weekly Strategy Open Interest Analysis here.
*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 4/5: successful pin.
Friday 4/7: successful pin.
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Tags: amzn, day trading, delta hedging, market, max pain, open interest, option trading, options, pinning, S&P 500, SPX, spy, trading, TSLA