Options – week of April 18, 2016

Last week

Week endingOpenHighLowClose
Apr. 8, 20162064.002071.502026.002041.75
Apr. 15, 20162041.002081.752020.252074.75

Commentary for last week

SP500 index rallied again and recovered its prior week’s loss. But it lost its momentum in the past two days. It could be because of the April option expiration or fear of the ultra-short-term overbought condition. However both the SP500 cash index and the ES closed above the 2075 level. The ES made another new high.

Last week’s trades

160415-ES-60a

ESM6 April 15, 2016. 60-minute bars.

The rally sparked some interest among Call buyers, but the ES didn’t get above Nat’s trigger point until Wednesday’s open.

There was a little irrational exuberance to exploit, but not much time premium left to capture.

The options all closed out-of-the-money, and although the premium was small, it was all profit.

This week

Member content

Hi . Here is the member content for this week.

This is a critical decision week. 2075-2035 is a major consolidation range and the SPX needs to break through the overhead resistance that stalled the advance last week if it is going to move higher.

The long-term, intermediate term and short term are all in a bullish uptrend. But recently an overbought condition has developed in the short term which is eroding the buyers’ confidence.

Last week the market stalled and went flat at the overhead resistance area and that is creating the impression that the index may have difficulty carrying the price higher. While we expect to see a this peak this week, it could prove to be an exhaustion sign.

Calls:

Above 2075 strike price, most Call contracts are located on the 2080, 2090 and 2100 strikes. As long as the index doesn’t go below 2050, the price could go up to challenge the 2100 level. Our system shows that index and ES shouldn’t close above 2125 this week; therefore we look to sell Calls when the price moves above 2090.

Puts:

Below the 2035 strike price, the largest open interests for Puts are located on the 2000 strike price. This suggests the index or the ES could fall into the 2000-2020 zone if the 2035 support level fails to hold up. Our system shows that index and ES shouldn’t close below 1960 this week; therefore we look to sell Puts when price goes below 2035.

Put/call volume ratio on SPX and ES April 22 option is 1:2 from 2125 to 2035 level, and 2:1 from 2035 to 1935 level.

Nat’s option trades for this week

ExpirationStrike price Sell options when price is
April 22, 20162105, 2115 callsabove 2090
2100 calls
Meanline 2075
April 22, 20161985 putsbelow 2035
1975, 1965 puts

 

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