|Mar. 18, 2016||2009.50||2042.75||1995.50||2038.75|
|Mar. 24, 2016||2036.50||2047.50||2012.25||2030.25|
Commentary for last week
SP500 index had a minor pullback last week. It had the narrowest weekly range since the last week of November 2015. It showed the buyers were reluctant to jump on the buying side after several Fed members commented about a possible rate hike in April.
Last week’s trades
There were no option trades last week. It was a short week, with the Easter holiday on Friday, and the range for the week was the smallest in five months.
The price never reached Nat’s meanline (2050) and was generally negative until the end-of-the-week bounce carried it back almost to the open — a near doji, showing indecision.
There was no “irrational exuberance” we could capitalize on by charging excessive premiums for options, and we stayed on the sidelines.
Hi . Here is the member content for this week.
This week is first quarter re-balance week. SP500 index has three option expiration days (Mar.30, 31 and April) and ES has two expiration days (Mar. 31 and April 4). These multiple option expirations are likely to cause the price to go sideways with a relatively narrow weekly range.
Above 2025 strike price, large volume of Call contracts show up at 2050 strike price. As long as index doesn’t go above 2075 level, those calls buyers are likely taking profit and cause the price to retrace. Our system shows that both index and ES shouldn’t close above 2095 level, therefore we look to sell Calls when price moves above 2040 level.
Under 2000 strike price, 1975 strike price Put contracts are relatively larger than Call side. This hints the price may drop near that level if index fails to hold up 2000. Our system shows that index and ES shouldn’t close below 1945 level, therefore we look to sell Puts when the price goes below 2000.
Put/call volume ratio on SPX and ES April 1 option is 1:2 from 2100 to 2000 level, and 1.5:1 from 2000 to 1925 level.
Nat’s trades for this week
|Expiration||Strike price||Sell calls when ES price is|
|April 4, 2016||2085, 2095 calls||above 2040|
|April 4, 2016||1945 puts||below 2000|
|1935, 1925 puts|