Option trades – week of Nov. 28, 2016

Last week

Week endingOpenHighLowCloseVolume
(million)
Nov. 4, 20162120.002130.502078.752081.5011.6
Nov. 11, 20162106.002180.502028.502160.5017.1
Nov. 18, 20162164.502187.502152.252180.257.8
Nov. 25. 20162179.502211.752178.502211.256.0

Commentary for last week

The S&P500 index enjoyed rally on the post-Thanksgiving half day of trading. The price spiked in the last 10 minutes of trading with very low volume into the close. The breakout price at 2193 was successfully held up, after it was tested by a brief pull back last week.

Last week’s trades

161125-es-60a

ESZ6 on Nov. 25, 2016. 60-minute bars.

Despite the disruptions from the Thanksgiving holiday in the US, it was a decent week for Nat’s option traders.

The market was closed Thursday and open only half a day Friday with most traders leaving Wednesday afternoon for a long weekend.

But the continuing rally in the S&P Index and futures ignited the kind of irrational exuberance among option buyers and position hedgers we need to inflate the prices paid for the options we sell.

The price broke above Nat’s trigger for selling Calls on Monday, and continued above it all week. Volume was very light, as expected, but there were opportunities to sell right through Wednesday.

The market closed Friday below the strike price for our Calls, and we kept all of the premium.

This week

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This section contains the option trades for the coming week. It is reserved for paid subscribers. You can see previous option trades free of charge in the archives.

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Hi . Here are the option trades for this week.

This week is the combination of the end of November and the beginning of December, normally a bullish period. The Index will naturally tend to hold up in this period, but we can’t rule out external influences and the uncentainty created by the market’s rapid rise.

2175-80 will be the key zone for options this week. Holdng above that area could push the price up to 2235-50. Failing to hold could lead the index to dip into the battle zone from 2170-2135.

The SP500 index still has three option expiration days on Nov. 28, 30th and Dec. 2nd. ES mini has two on Nov. 30 and Dec.2nd.

Calls

Above the 2175 strike price, Calls were bought at 2200 and at 2220-2235 strike price levels. As long as the index holds above 2175 level, the index could slowly move up. Our system shows that the index and ES shouldn’t close above 2285; traders should look to sell Calls when the ES moves above 2245 or higher.

Puts

Below the 2125 strike price, Puts were heavily bought at the 2125 and 2120 strikes. A move below 2125 could cause an imbalance of puts and calls, and lead the price to fall sharply and then reverse sharply from that lower level. Our system shows that index and ES shouldn’t close below 2100 level; therefore we look to sell Puts when the ES goes below 2165 area.

Put/call volume ratio on SPX and ES Dec 2 option is 1:4 from 2250 to 2175 level, 1:1 from 2170 to 2135, and 4:1 from 2130 to 2075 level.

Nat’s option trades for this week

ExpirationStrike price Sell options when ES price is ...
Dec. 2, 20162275, 2285 callsAbove 2245
2265 calls
Meanline 2175
Dec. 2, 20162125 putsbelow 2165
2115 , 2105 puts

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