Options – week of July 20, 2015

Commentary for last week

Last week the curtain finally came down on the Greek debt drama. Greece surrendered its creditors in exchange for the promise of a massive new bail out fund, and investors turned their attention to China and to the earnings reports from US companies, which were better than expected for some key companies. The US indices rallied strongly.

The futures opened down in the pre-market trading before the start of the week, and some traders were able to sell Puts early, but the prices were not particularly attractive. We did not sell Puts this week.

As the week continued the market rallied nicely and our trigger point for selling Calls was hit Monday and remained in force for the entire week.

As we predicted, the futures did not close above 2125 and all the options we sold expired OTM, allowing us to keep the entire premium. Here is the annotated chart with last week’s trigger levels. Go to last week’s post to see the full trades for last week.

Intraday chart, futures
150717-ESU5-60

ESU5 July 17, 2015. 60-minute bars

 

This week:

This week will see a small pullback in early week days due to short-term overbought condition. But 2100-95 zone will likely hold ES up. Even though this week doesn’t have too many key economic reports to be released, there are tons of company earnings reports which could push the price up to challenge a key resistance zone (2135-36.50) ahead.

Member content

Here is the member content for the week of July 20, 2015.

Calls:

2095 is the option mean line for this week. Above 2095 level, there is a  heavy volume of Calls outstanding at 2140 to 2150. This indicates that short term sentiment still favors the upside. But those heavy Call levels will likely build a wall to keep the price down this week. Our system shows that ES shouldn’t close above 2175 level this week, therefore, we could look for selling Calls at the strikes in the table if ES rallies above 2135 level.

Puts:

Below the 2095 strike price Put, there were large open interests at 2075, 2050 and 2040-35 strike price level. Our system shows that ES shouldn’t close below 2035 level this week. Therefore, we could look for selling Puts at the strike prices in the table if the ES drops below 2100 level.

Put/call volume ratio on ES July 24 option is 1:3 from 2200 to 2100 level, and 1:1 from 2100 to 2035 level.

Nat’s trades for this week

ExpirationStrike price Sell option when ES price is:
July 24, 20152175, 2180, 2185 calls
2165 calls> = 2135
Meanline 2095
July 24, 20152055 puts< = 2100
2045, 2035 puts

[/MM_Member_Decision]