Option trades, week of April 11, 2016

Last week

ESM6 Week ending Apr. 8, 2016
Week endingOpenHighLowClose
Apr. 1, 20162030.252067.002019.252064.75
Apr. 8, 20162064.002071.502026.002041.75

Commentary for last week

SP500 index had a consolidation move last week. It retraced from Monday’s high at 2074, and closed near the bottom of the weekly sideways range. But the retracement didn’t do any damage to the uptrend direction.

The ES made a new high and a higher low but closed about 20 points below the previous week.

Last week’s trades

160408-ES-60a

The sharp decline and the drop below Nat’s meanline on Monday encouraged option buyers to increase the premium for Puts.

There were good opportunities to sell Puts at good prices on Tuesday and Wednesday, when there was still a fair time premium priced in.

The enthusiasm of the buyers was misplaced however, and all of our options expired out-of-the-money, allowing us to keep the entire premium.

This week:

Member content

 

Hi . Here is the member content for this week.

This week is major April option expiration week. Both SP 500 index and ES have large Call and Put option positions open. Based on the weekly option open interests, 2030-2055 zone will be where both sides fight for control. A break outside of this zone could cause the price run up or down quickly. The range could expand up to 2075-2085 or down to 2000-1980.

Calls:

Above the 2025 strike price, most Call contracts are located at the 2050, 2075 and 2100 strikes. As long as the index doesn’t go below 2025, the price is likely to hold up until the two index options expire, which occurs before the ES options expire on Friday. Our system shows that the index and the ES should not close above 2115; therefore we look for sell Calls when the price moves above 2065.

Puts:

Below the 2025 strike price, the open interest is largest around the 1980-1970 and the 1950 strikes. This suggests the index or the ES could fall into the 2000-1980 zone if 2025 fails to hold up. Our system shows that the index and the ES should not close below 1950; therefore we look to sell Puts when he price goes below 2005.

Put/call volume ratio on SPX and ES April 14, 15 option is 1:4 from 2100 to 2000 level, and 2:1 from 2000 to 1900 level.

Nat’s trades for this week

ExpirationStrike price Sell options when ES price is
2105, 2115 callsabove 2065
04/15/20162095 calls
Meanline 2030
Apr. 15, 20161975 putsbelow 2005
1950, 1935 puts

[/MM_Member_Decision]