Open Interest for Expiration 5/6/16 – open

This was one of two premium posts  for members posted before week starting 5/2/16

Volatility is back – at least for the time being. We knew at the start of the week that there was SPY 210 and 215 high calls. The 210’s never closed and last week SPY got close but was never able to even make it above 210.

Even though we knew that was a possibliity, last week was indeed tricky. One member brought up a great point that I want to mention. Normally during the week I mention that there is usually a premium rug pull sometime toward the middle/end of week. Last week, we (that member and I) missed seeing it coming and the best way to not repeat things is to learn from them. What I believe was missing is that when buying calls get rewarded we begin to get on edge cause we know that it can’t last forever – hence we begin to think rug pull. Last week, calls were not getting paid, but were not being too harmed either. Things were mostly stalling and thus complacency set in – then bam, not just rug pull, but Defcon 5 rug pull (when it comes to weekly options) came about. So let’s pay attention to that. Next time we get into the stalling complacency (which typically happens after a few week run), let’s recall that we might be due for a Deacon 5 rug pull.

Let’s move to next week: Earnings season is basically wrapping up in terms of the momo’s and now we know who the winners and losers are which is helpful in moving forward. We are also moving into a cycle of greater volatility, which means both buy the dip and sell the rip. No more one way street for now.

SPY: The 205 puts and the 212 calls are what stand out. 205.03 was the low from Friday and we know that if it is breached then the hammer candle made on Friday is not a reversal candle. Also if 205 is breached and not quickly recovered it could lead to a sharp sell-off because of the all the puts on strikes underneath it (mostly 204 and possibly 203). In terms of the upside there is plenty of room from an open interest stand point. Over 207.13 (Friday’s high) can once again put things in a more bullish mode (at least in the short term), but I wouldn’t get too excited because there is still a lot the market needs to prove. Targets above 207.13 are 207.95, 209 and 209.75 (also resistance areas).

AAPL: Uncle Carl may be to blame for the quickness of the sell-off, but we knew it was in trouble before he spoke. The reference we have to work with on the open interest is the 95 calls. Currently price at 93.74 and has closed outside of it’s lower bolinger band three days in a row. Most likely we see both a bounce and some bear flagging over the coming weeks. Friday morning I mentioned the major support of 92.5 which ended up being the exact low (92.51). That level likely holds again even if breached. The best opportunity would be if price undercut that low early in the week and then comes back above. That would be the place to go long with a potential target of 95. Any bounce between 95 and 97 would be an opportunity to buy puts. 

AMZN: As of Friday AMZN was able to hold up very well. There is a chance that it had to do with trying to trap both call and put buyers on Friday so we need to see what happens next week. I would not play this to the long side on a breakout next week because even if it will be going higher in the coming weeks it closed outside of it’s upper bollinger band and thus any further gains will likely be limited and or given back until it consolidates. With that in mind should AMZN get over 670 or even better 675 (the high calls) early next week it would be worth buying puts on (depending on the circumstances). Below 654 (Friday’s low) the next support areas are 647 and 638. Those are also areas to consider buying calls depending on the overall market condition.

BIDU: When I saw it shoot higher Friday morning I knew those guys in the open interest spread wanted to be paid. Luckily we got in at a good time and out of half in time to make it a free trade. It closed way off the highs, but hard to make meaning of it with pinning. Based on technicals it will need to get back over 197.50 to get momentum to push it back to 200 (where it may struggle with the high calls – but it has been known ignore about high calls when it has momentum). A failure to get over 197.50 might keep it in consolidation mode next week. There is technical support at 191.70 and then 189 should it reverse lower.

FB: Although it gave back gains from its open on Thursday morning, it was able to hold the gap. Similar to AMZN if it is going to indeed go higher it likely needs some more time and thus any gains next week could be slow and have trouble sustaining themselves. The highest calls are at 120 and I think that any push toward 120 or above is an opportunity to buy puts. Under Friday’s low and FB will likely drop below 115 with the next support at 114.30 and then 112.50.

GOOGL: At this point chasing it to the downside is not recommend because it is a bit oversold. Based on the open interest and the high calls at 720 any bounce to or over 720 is an opportunity to buy puts. If the market is very strong and the momo’s get some action then it would be better to try for puts closer to the 727’ish. Under 703 support areas are 700, 687 and 683, however the 700 puts might hold price up (note it does have low volume so the puts may not act as much support). Under 700 though and closer to 690 could be worth buying calls for a bounce. For now we can assume that it likely closes between 700 and 720 next Friday.

GS: Even with the market selling off pretty hard, GS actually held in there pretty well. Continuing strength would be good for the bulls to see. Having said that there is likely more pause or downside still in the cards and should GS trade up to 167 it would be a good place to buy puts. If GS breaks 162.50 the next support is 160 and then 156/157 (also a place that has put support). Around that area would be a place to buy calls.

LNKD: This is still a remain to be seen stock. For right now it remains in the bull camp and staying over 124 will be important. Breaching 124 opens the door for it to fall back down to its lower range near 110; however prob not in a straight line and there is put support at 120. Above 125 and the next target is 131. If it can get over 131 it may have a large and quick move, but will likely be blocked (at least initially) by the 140 calls. For next week a dip to the 120 would be worth trying calls. Over 131 would also be worth calls with a target near 140.

NFLX: Very weak after earnings and likely to see lower in the future, but hard to short at current levels. Anything below 88 targets 86.75 (a place to try going long). Above 90 and resistance comes in at 92.50 and 95. Anything at or above 95 would be a good place to buy puts. Some kind of consolidation between 88 and 95 is very likely next week.

TSLA: Earnings on Wednesday.