Option trades – week of Aug. 17, 2015

Commentary for last week

Last week the Chinese central bank suddenly devalued the Chinese Yuan and sent SPX and ES price down on the globex system. Later it triggered selling level at 2065 and caused the price to freefall into the 2050-46 zone before buyers stepped in and pushed it back up higher on Friday. Both SPX and ES had a big swing price move last week.

That move allowed us to make profitable option trades in both directions. We were able to sell Calls with 2125 strike prices early in the week, at good premiums on Monday, when the price ran up, and sell Puts with a 2010 strike at lower – but still profitable – prices on Wednesday.

On Friday the futures closed at 2089.75 (one tick below the 2090 strike, it is worth noting). None of our options were in the money, all expired worthless, and we kept the entire premium, a nice change from the previous week when we were unable to sell any options.

Here’s the annotated chart of the futures.

150814-ES-60

ESU5 Aug. 14, 2015. 60-minute bars

This week:

This week the major August monthly options expire:.VIX options on Tuesday, SPX option on Thursday and ES option on Friday. Last week’s low at 2046.75 on ES and 2052.09 on SPX should be this monthly low. Last Friday’s low could be the low area for this week’s price movement. Price could be held up until expiration days are over.

Member content

Here is the member content for this week.

Calls:

Our system shows that ES shouldn’t close above 2165 level this week even price breaks through 2135 line. therefore, we could look for selling above strike price calls if ES rallies above 2100 level.

Puts:

2065 is a control line for ES. As long as ES holds price above this control line, any below 2070 puts will become a worthless. Our system shows that ES shouldn’t close below 2040 level this week. Therefore, we could look for selling puts if ES drops below 2080 level.

Put/call volume ratio on SPX and ES Aug. 20 and 21 option is 1:2 from 2165 to 2100 level, and 2:1 from 2095 to 2000 level. The differece price between SPX to ES is 2 points.

Nat’s option calls for the week of Aug. 17

ExpirationStrike price Sell options when ESU5 price is
Aug. 21, 20152145, 2155, 2065 calls
2135 callsAbove 2100
Meanline 2100
Aug. 21, 20152065 putsBelow 2080
2055, 2045, 2035 puts

 

[/MM_Member_Decision]