Option trades – week of Oct. 3, 2016

Last week

ESZ6 for the month of September. Prices to week ending Sept. 30, 2016.

Week endingOpenHighLowCloseVolume
(million)
Sept. 2, 20162167.752183.752154.752179.258.96
Sept. 9, 20162179.252189.252113.252114.506.5
Sept. 16, 20162115.252156.002100.252130.5017.0
Sept. 23, 20162132.502172.752126.252157.508.3
Sept. 30, 20162156.252168.252132.752156.7511.1

Commentary for last week

The SP 500 index made an inside range week. It was not greatly affected by the Deutsche Bank liquidity news and didn’t collapse as in the the Lehman failure. Instead it closed with what is essentially a doji, up with a tiny net gain for the week.

This week:

This week starts the last quarter of this year. Also there are lots of different option expiration dates. The index has 3 option expiration days ( Oct, 3, 5 and 7), even ES has two option expiration (Oct 5 and 7) this week. These option expirations could cause the index to make a whipsaw move.

Calls:

Above the 2155 strike price, most Call contracts bought were shown at 2195-90 strikes and 2130-35 strikes. The Index could run up to the 2195-90 area if 2155 line holds price up, or higher if it can breakout 2210. Our system shows that index and ES shouldn’t close above 2210 level, therefore we look to sell Calls when the price goes above the 2190 area.

Puts

Under the 2150 strike price, the Puts with strikes at 2125 and 2100 were bought heavily last week. As long as the Index stays above 2150 line, the Puts buyers have to unload their positions, which will contribute to holding up the index price. But if the index goes under 2150, sellers could push the price down to last week’s low area 2140-35 to increase premium for 2125 puts. Our system shows that index and ES shouldn’t close below 2075 level this week; therefore we look to sell Puts when the price goes below 2140 area.

Put/call volume ratio on SPX and ES Oct. 7 option is 1:3 from 2200 to 2155 level, and 3:1 from 2155 to 2100 level.

Nat’s option trades for this week

ExpirationStrike price Sell options when ES price is
Oct. 10, 20162215, 2220 callsAbove 2190
2210 calls
Meanline 2155
Oct. 10, 20162100 putsBelow 2140
2090 , 2080 puts