Open Interest for 3/24/16 (open)

This was one of two premium posts for members prior to week starting 3/21/16.

Last week the open interest saved us from getting long some of the momo’s that looked like they were going to break out. Sometimes the open interest is just a way to assess risk to reward. With SPY, it went ex-dividend and was left with the high calls at 205 and 206. SPY closed at 204.38. Next week, I think the odds favor a pull-back and will both be interested in shorting and then buying a dip if all plays out. Note next week is a shortened week that ends on Thursday.

SPY: For right now there remains resistance at 205 and 206. This lines up very well with technical resistance. The highest puts as of now are 200 and definitely also a place of technical support. With regard to trading SPY, I think anything over 206 is a short; however, there is a chance price doesn’t see 206 and in that case any failure to get above 205 early in the week would also have me look at SPY puts. Targets I would look for to see if support holds is 200/201, but I actually think there is potential to see 198 and, as unlikely as this may sound, maybe even 195/196. For now I am more in camp that support is found in the 198-201 range. It’s also possible that price consolidates sideways in a tight range or that price moves higher, but I find the upside much more limited than the downside. 

AAPL: I think the recent move higher has more room over the coming weeks and would be interested in buying a pullback. There is a gap to be filled at 102.91. If price should get there next week I would consider buying calls depending on the overall market. 105 is the highest calls currently, which price closed over on Friday. I wouldn’t say there is no way it stays above there and continues higher next week, but I don’t like the risk/reward of chasing it higher from where it closed.

AMZN: The current open interest range is 530 to 565/570. Currently, the best set-up I see with AMZN is to buy calls near or slightly under 530. That level is a place of prior support and I believe would be good for at least a 10 point bounce if not more. The only other set-up would be to try shorting over 570 and I would reassess the open interest if AMZN got there. 

BIDU: A good set-up last week that I had conviction in and wasn’t patient enough for a better entry. This reinforces my more recent strategy of waiting out Monday mornings and entering trades on pull-backs rather than breakouts. Lesson reinforced. Next week the open interest has some support at the 180 puts and resistance at the 190 calls. BIDU, as I mention all the time doesn’t pin as well as some of the others when it gains momentum. Next week I am not as bullish on BIDU, but would be interested in buying a dip between 180 and 182 should price get there or buying a consolidation toward the end of the week. 

FB: It’s definitely making a decent effort in trying to move higher. Having said that, because I am slightly less bullish in the overall market for next week, I may try to exit the current calls early on depending on where it opens. The good news with the open interest is there is actually a decent amount of puts and not just calls. The puts start at 109 and calls at 113 with the highest at 115. The best pin as of now is near 110. A rip to 113 would be great to sell the calls. Other than that happening I may stop out.

GOOGL: Although price was able to close above the 750 calls, it was interesting to watch breakouts fail after I mentioned the combo of puts and calls were bought early in the week. It’s what prevented me from getting long and thus saved me from a loss. Next week there is a high call wall at 760 so the upside as of now seems limited. I would be interested in shorting GOOGL near 760 and possibly even at a break of 750. I think possible targets for a long entry are between 730 and 737. Having said that, if the market is very week, GOOGL could see 717 next week. 

GS: I was surprised at how well it held up on Friday closing above all the high call strikes. Next week price is already above the highest calls at 155 and thus, although I am in the pull-back camp next week, if GS can remain over 155 next week than I think a sideways consolidation to higher in the overall market would have to be on my mind. Should GS close below 153.50 next week, I think it would be a caution sign of things to come for the coming weeks. I will be watching financials closely next week to see if they remain strong or give back last weeks gains.

LNKD: The highest calls stick out at 115, but the volume is very light. As bearish as I am on LNKD the company, I actually think the odds favor more upside for the stock before further major downside. Think about how CMG tanked and then had a massive bounce for weeks before recently moving lower again. Granted they had buybacks, but I am not ready to begin shorting LNKD.  I would be interested in buying calls if price gets to 106 next week.

NFLX: Once again the 100 calls stand out. Remember that NFLX doesn’t necessarily fail at high calls. With that said I am more interested in shorting NFLX than going long. Also, the set-up for shorting is better this week because there isn’t a high wall of puts like normally. Below 100 and I would likely buy puts for a possible target of 95. TSLA: Currently price is above the first large call strike. The move off the lows has been incredible and it’s very tempting to want to short it at these levels and given the high calls. However, it’s possible that it consolidates sideways before its next move. I do believe if the market is weak next week that TSLA can easily revisit 220, but entry would need to be precise, thus I think it might prove a difficult trade.