Options – week of Feb. 8, 2016

Last week

Week endingOpenHighLowClose
Jan. 29-16
1895.501933.001851.251934.25
Feb. 5-161929.751940.001865.001873.75

Commentary for last week

SP500 index solved its overbought condition and pulled the price down again last week in response to weak US economic reports. The index reached just a few handles below 1950 but closed down for a 3.1% net weekly loss.

This week:

The decline could resume again this week if the index moves under the 1850 level. The 1960-56 zone will be a major resistance zone. All eyes will focus on Mrs. Yellen’s speech on Wednesday which could send the index in either direction.

1855 is this week’s option meanline. 1900 and 1800 will both be levels to fight for.

Calls:

Below 1900 strike price the Call buyers decreased dramatically last week, to a very low level. However both 1925 and 1950 have some open interest. This indicates that either ES sellers will control this week’s downside move or they will be squeezed out if the index moves above 1935 and forces the shorts to cover. Our system shows that ES shouldn’t close above 1965 level, therefore we look to sell Calls when the ES moves above 1910 level.

Puts:

There are lots of Puts bought below 1855 last week. As long as SPX stays below 1900 level, odds favor a down move. Our system shows the index and ES shouldn’t close below 1750 level, therefore we look to sell Puts puts for scalping trading while the ES is below 1825.

Put/call volume ratio on SPX and ES Feb 12 option is 1:2 from 1975 to 1900 level, and 1:5 from 1855 to 1750 level.

Nat’s option trades this week

ExpirationStrike price Sell options when ES price is
Feb. 12, 2016 1945, 1955 calls
1935 callsAbove 1910
Meanline 1855
Feb. 12, 20161780 putsBelow 1825
1750 puts