Options – week of April 4, 2016

Last week

Week endingOpenHighLowClose
Mar. 24, 2016 2036.502047.502012.252030.25
Apr. 1, 20162030.252067.002019.252064.75

Commentary for last week

SP500 index turned bullish again after Fed Chair Mrs. Yellen’s speech on Wednesday. Her dovish comments, indicating a rate hike any time soon is unlikely, called the buyers back into the US equity market. The index closed 1% above the January high, which is the highest level for this year.

Last week’s trades

160401-ES-60a

There was a reasonable opportunity to sell Calls last week.

The market reached Nat’s trigger level at 2040 three times, and even on Friday when the time premium was almost entirely eliminated there was still active demand for Calls.

There was  much less interest in Puts and the low premiums did not warrant a trade.

All of our options expired out-of-the-money and we retained the entire premium.

This week

Member content

Hi . Here is the member content for this week.

This is the first week of the new quarter, and we are still in a favorable season for stocks. The bullish bias at the end and beginning of the month is likely carrying through to Tuesday.

The SP500 index has cleared the 2050 resistance level, and intends to head toward 2100. We could see index continue to rally as long as the 2050 level holds up.

But if the index breaks below 1990 level, buyers will rush for the exit and drive the market lower.

Calls:

Above the 2020 strike price, lots of Call contracts have been purchased with strikes up to 2110 last week. As long as the index stays above 2000 it is likely to hold up. Our system shows the index and the ES should not close above 2115 level; therefore we look to sell Calls when the price moves above 2080.

Puts:

Below the 2050 strike price there is very little open interest at any level except for the 2050, 2025 and 2000 strikes. This suggests not many people expect the index to fall below the 2000 level. Our system shows that index and ES shouldn’t close below 2000 level, therefore we look for sell Puts when the price goes below 2038.

Put/call volume ratio on SPX and ES April 8 option is 1:3 from 2100 to 2000 level, and 2:1 from 2000 to 1950 level.

Nat’s trades for this week

ExpirationStrike price Sell options when ES price is
Apr. 8, 20162110, 2115 callsabove 2080
2105 calls
Meanline 2055
Apr. 8, 20162005 putsbelow 2038
1985, 1975 puts

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