Options – week of Feb. 22, 2016

Last week

Week endingOpenHighLowClose
Feb 12-161876.251884.501802.501860.00
Feb, 19, 20161865.251933.501865.001914.5

Commentary for last week

SP500 index covered most of the loss made in the first two weeks of February. It successfully held above last year’s low, but still closed under the 10-week moving average line.

Last week’s trades

160212-ES-daily

ESH6, Feb. 19, 2016. 60-minute bars

Last week was pretty much a straight up rally that trended up from Tuesday (after Monday’s holiday) to Friday.

The positive sentiment encouraged buyers and pushed the premium we could collect for selling Calls to a decent level.

.There were good entry levels on Tuesday and Wednesday, for some traders who sold Calls after Nat’s meanline held the price up.

More cautious traders were able to sell on Wednesday when the price broke above Nat’s trigger line.

In both cases the Calls expired out-of-the-money at Friday’s close and we retained the entire premium.

This week:

Paid subscriber content

Hi . Here is the member content for this week.

There is a little sign that the index had some trouble dealing with its overhead resistance line on Friday. It could result from February option expiration day. But the sellers may return if this sign gets stronger. 1940 is a current resistance line; it also acts as the option meanline for the Index. For the ES. 1930 is the meanline this week.

Calls

:Above the 1930 strike price, the Call open interest is larger than the Put open interest. This indicates that buyers still expect the index will continue to move up. Our system shows that ES shouldn’t close above 2000 level, therefore we look to sell Calls when ES moves above 1930 level.

Puts:

Under the 1900 strike price, the Put open interest remains large. As long as the index stays above 1900, those Put buyers may purchase index future contracts to hedge. Or they may unload the Puts when the index drops. Either way will increase volatility and cause big price swings. Our system shows that index and ES shouldn’t close below 1800 level, therefore we look to sell Puts for scalping trading while ES is below the 1875 line.

Put/call volume ratio on SPX and ES Feb 26 option is 1:0.5 from 2015 to 1930 level, and 1:4 from 1930 to 1780 level.

Nat’s option trades for this week

ExpirationStrike price Sell options when ES price is:
Fri. Feb. 26 2015 1995, 2005 calls
1985 callsAbove 1930
Meanline 1930-35
Fri. Feb. 26 20151820 putsBelow 1875
1800, 1785 puts

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