Option trades – week of Oct. 31, 2016

Last week (ES)

ES weekly prices for October.
Week endingOpenHighLowCloseVolume
(million)
Oct. 7, 20162158.752164.002136.002146.508.1
Oct. 14, 20162152.002163.502107.752126.5011.0
Oct. 21, 20162126.252144.502116.752136.008.4
Oct. 28, 20162137.002149.752112.502123.756.9

Commentary for last week

The SP 500 index experienced some whipsaw moves last week. But mainly it reversed from the prior week’s move up and attempted to retest the September low.

Last week’s trades

161028-es-60

A good week for option traders. The price moved above Nat’s trigger for selling Calls early in the week, while there was still lots of time premium in the price.

Hope that the previous week’s rally would continue prompted hedgers and investors to jump into the Calls and we were able to get decent prices for those we sold.

At the end of the week all of the Calls we sold expired out-of-the-money and we kept the entire premium.

This week:

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Hi . Here are the option trades for this week.

This week is the first trading week of November. We expect to see re-positioning for the new month or adjustment to different option expiration on the major key strike prices. Likely to be a busy week for option traders.

The index itself has 3 weekly option expirations (Oct, 31, Nov. 2 and 4), and so has the ES. The election is 10 days away. We will also see hedging activities in the options. This could bring lots of volatility into the market.

Calls:

Above the 2135 strike price, most calls contracts bought were shown at 2150-60, 2175 and 2200 strike levels. Those strike prices are likely acting as short-term resistance levels, especially at 2175 and 2200. Our system shows that index and ES shouldn’t close above 2185; therefore we look to sell Calls when the ES pops up under the 2150 area early in the week.

Puts:

Under the 2120 strike price, the 2100 to 2075 strike Puts were heavily bought last week. The 2120 level will become a very important line for this week’s option trading. A move below it could lead the index down toward 2100 or lower. Our system shows that index and ES shouldn’t close below 2050 level, therefore we look to sell Puts if/when the ES goes below the 2100 area.

Put/call volume ratio on SPX and ES Nov. 4 option is 1:2 from 2200 to 2135 level, and 4:1 from 2120 to 2050 level.

Nat’s option trades this week

ExpirationStrike price Sell options when ES price is
Nov. 4, 20162205, 2215 CallsNear 2150
2195 Calls
Meanline 2135
Nov. 4, 20162075 Putsbelow 2100
2065 , 2055 Puts