Open Interest for Expiration 4/1/16 – open

This was one of two premium posts  for members posted before week starting 3/28/16.

Good week given the opportunities that we were actually given. One important take away is how patience was rewarded. The start to the week I kept preaching not to chase. Options are not friendly to a still market and especially one that suddenly pulls back. Although we only came away with small profits, I’m pretty sure we saved a ton by sitting on our hands most of the week. Next week is quarter end which brings up the question, will there be a chase for performance?

Unfortunately I don’t know the answer, but given most funds are probably underperforming now that the market is pretty much flat for the year, I would say the odds favor a chase. Let’s get into the open interest keeping in mind that until March 31st we may see some crazy moves that don’t care about the open interest. Although, that may create a great opportunity toward the back half of the week.

For the most part I am going into next week with the assumption that the bulls have the lead (at least in the first half of the week). Having said that if SPY cannot get above 204 next week, I would question the bullish thesis. Also, should there be a massive chase for performance that holds up, Friday’s job number could result in some type of blow off. These are not predictions, just thoughts to keep in mind. With regard to taking weekly calls on any of these, especially if we can’t get in on a dip, I would say be careful with them once the quarter ends on Wednesday.

SPY: Currently there is a range of 202 to 204, but given that the strikes aren’t as prominent as they usually are I think this will likely change by mid week and as of now don’t give it much credence. Should SPY not be able to get over 204 at the start of the week then those calls will likely build and than act as resistance, but if price gets over 204 early on, then high calls will likely shift. I think the best gauge of short term momentum will be where SPY is relative to Friday’s high and low. The high 203.16 and the low 201.74 (the 200 day SMA).

Also next week is quarter expiration. Since there aren’t very many throughout the year I don’t have much experience with them and am only showing it so we can take notice of the 207 calls should price get there. However, let’s not put too much emphasis on it. 

AAPL: Now that AAPL has taken a break from getting over its high calls (remember I said it usually happens for 3 weeks in a row), it likely takes a break and again doesn’t close over them for a while. Thus, if price stays over 105 it offers a short opportunity. If there is a chase into quarter end AAPL may catch a bid and go up further. If those calls are still there it offers a good risk to reward  opportunity to get puts into the weeks end. 

AMZN: That was some monster rally toward the end of the week. There is very tough technical resistance at 583. Over that and it might be worth calls for a run straight to 600 where those high calls are. At that point it could offer an opportunity to buy puts if the open interest is the same and if premium on options isn’t ridiculously expensive. 

BIDU: The only thing that stands out is the 190 calls. That would be resistance if price got there but not necessarily a short because when bidu gets momentum it doesn’t care about high calls. A pullback to 182 would offer a good entry point for calls, but it’s possible it doesn’t offer a pullback and over 185 might get it going. I’m keeping an eye on this early next week. 

FB: This one continues to struggle to close over its high calls even though it continues to threaten to. It does however get quickly bought on every sell off. For now it does have room to 115 before resistance and over 113 it likely get there. I don’t love the way the daily chart looks on a technical chart, but with quarter end and then earnings coming that may not matter. A strong push over 115 and it may start it’s 3 week run (similar to how AAPL will do that every few months).

GOOGL: I would normally say that 750 and 760 are resistance, but the volume is so light that the open interest likely changes by Tuesday. A pullback to 743 might be a good entry if the market is bullish. If the market is more bearish I think this can get down to 732 and possibly 717.

GS: The only resistance from the open interest is the 160 calls. Over 153.75/154 and I think it has a chance to get their quickly. If it remains under 154 it probably has more downside in the future.

LNKD: The open interest has not been great at giving direction lately. Also, I don’t know if funds are going to want this on their books at the end of the quarter so it may struggle or move lower at the start of the week. I would consider a long near 106, but for now no interest long or short. 

NFLX: This one continues to baffle me. They are one of the first to report earnings in a few weeks so it may begin a run up into them. Although I think there has been some under the surface distribution, if price gets over 103 next week momentum will probably carry it higher and might be worth calls. Except for the 94 puts there isn’t anything telling in the open interest. A failure to get over 103 and it may continue to trade in a relatively tight range prior to earnings. Below 97, might put bears in control, but they rarely get much of an edge.

TSLA: Regarding just the open interest, there is resistance at 220 (which price closed over) and then 235. This could offer a good trade again at the end of the week based on the open interest, but with premium high at the start of the week I find it a difficult trade given where price currently sits.