Option trades – week of Nov. 21, 2016

Last week

Week endingOpenHighLowCloseVolume
(million)
Nov. 11, 20162106.002180.502028.502160.5017.1
Nov. 18, 20162164.502187.502152.252180.257.8

Commentary for last week

161118-es-60

ESZ6 Nov. 18, 2016. 60-minute bars.

The S&P500 index had a continuation high move last week. It attempted to break through August high but failed due to a short-term overbought condition. Nevertheless it managed to close with a 0.8% net weekly gain, which still was good for intermediate-term.

This week:

This week is a short week due to Thanksgiving holiday on Thursday and only a half-day trading on Friday. The volume will be thin in either SPX or ES. But the index still has three option expiration days on Nov. 21, 23 and 25th. ES has two on Nov. 23 and 25th. The 2175-65 zone becomes this week option key zone. By holding above it the index still could go up to 2200-35 zone. Failing to hold could lead the index to dip into the battle zone 2160-2130 or lower.

Calls:

Above the 2175 strike price, most calls contracts bought were shown at 2200 and above toward 2210 to 2225. As long as the index holds above 2160 zone, the index could struggle to move up until all shorts get squeezed out. Our system shows that index and ES shouldn’t close above 2225 level, therefore, the traders should look to sell Calls calls when the ES moves above 2195 or higher.

Puts:

Below the 2125 strike price, the 2100 strike Puts were bought heavily last week. A move below it could cause unbalance of puts and calls, and lead the price to fall sharply and reverse sharply from a lower level. Our system shows that index and ES shouldn’t close below 2075 level, therefore we look for short the puts when ES goes below 2150 area.

Put/call volume ratio on SPX and ES Nov. 25 option is 1:4 from 2250 to 2175 level, 1:1 from 2170 to 2135, and 5:1 from 2130 to 2050 level.

Nat’s option trades for this week

ExpirationStrike price Sell options when ES price is ...
Nov. 25, 20162235, 2250 Callsabove 2190
2225 Calls
Meanline 2175
Nov. 25, 20162100 Putsbelow 2150
2090 , 2080 Puts