Option trades – week of Oct. 24, 2016

Last week

Week endingOpenHighLowCloseVolume
(million)
Oct. 14, 20162152.002163.502107.752126.5011.0
Oct. 21, 20162126.252144.502116.752136.008.4

Commentary for last week

The SP 500 index had a minor oversold bounce week. It managed to hold price above its prior week’s low and closed under its previous week’s broken support level on Friday.

This week:

This week is last week of October. The window dressing could help to hold up index and go sideways. The index has 3 option expirations ( Oct, 24, 26 and 28), and ES has two option expirations ( Oct 26 and 28). All eyes will focus on Fed member speeches on Monday and Tuesday and GDP report on Friday. The SP500 index could have a big swing move under those influences.

Calls

Above 2140 strike price, most calls contracts bought at 2150, 2175 to 2200 strike price levels. Those strike prices are likely acting as short-term resistance levels, especially from 2175 to 2200 level. Our system shows that index and ES shouldn’t close above 2200 level, therefore we look for short the calls when ES pops up above 2150 area.

Puts

Under 2140 strike price, the 2100, 2090 and 2060 to 2050 strike price puts contracts were bought heavily last week. As long as Index stays above last week’s low at 2100, the larger puts buyers below 2100 level will have to unload their positions and help to hold up index price. But if the index goes under 2190, it will create selling pressure and push index to lower levels. Our system shows that index and ES shouldn’t close below 2050 level, therefore we look for short the puts when ES goes near 2100.

Put/call volume ratio on SPX and ES Oct. 28 option is 1:5 from 2200 to 2140 level, and 5:1 from 2140 to 2050 level.

Nat’s option trades for this week

ExpirationStrike price Sell options when ES price is
Oct. 28, 20162205, 2215 callsAround 2150
2195 calls
Meanline 2140
Oct. 28, 20162085 putsNear 2100
2065 , 2055 puts