Option trades – week of May 23, 2016

Last week

Week endingOpenHighLowClose
May 13, 20162053.002079.752038.502042.50
May 20, 20162041.252069.502022.002050.00

Commentary for last week

SP500 index dropped near the neckline of H&S pattern and managed to bounce from it. The major traditional options battle line 2050 remains its control line for both side players.

This week:

The May monthly range (from 2080 to 2022) will be in play this week.

The 2050 line will continue acting as a magnet for both sides, but slightly favours the upside.

Key economic reports also will largely influence the price this week.

Calls

Above 2070 strike price, the 2095, 2100-15 strike price Calls have relatively large open interests. As long as the index doesn’t go below 2035 level and holds up firmly, it could force Puts players to cover and push price back up 2075 or higher to challenge the 2100 level. Our system shows that index and ES shouldn’t close above 2100 level, therefore we look for short Calls when price moves above 2070 level.

Puts:

Under 2025 strike price, the 2000 strike price Puts have large open interests. The index or ES needs to hold above 1995 level to prevent triggering selling. If breaks below 1990 level, selling momentum could send price down near 1980-75 zone. Our system shows that index and ES shouldn’t close below 1950 level, therefore we look to short the Puts when price goes below 2025.

Nat’s option trades for this week

ExpirationStrike price Sell options when Es is
Friday May 27, 20162110, 2115 calls> 2070
2100 calls
Meanline 2050
Friday May 27, 20161975 puts< 2025
1965, 1950 puts