Options – week of March 21, 2016

Last week

Week endingOpenHighLowClose
Mar. 11, 20161994.502022.251967.252011.75
Mar. 18, 20162009.502042.751995.502038.75

Commentary for last week

SP500 index had a strong close on quadruple witching expiration day. It not only recovered all the loss made in the early months this year, it also closed with a small gain. So far, so good.

Last week’s trades

160318-ES-60

ESM6 to March 18, 2016. 60-minute bars.

Not much excitement for option traders last week. The full range for the week was about 45 points; a few weeks ago the market moved that far in a day.

The space between Nat’s Meanline and the trigger point to sell Calls pretty much contained the price activity.

A few traders managed to sell Calls on Thursday when the price spiked, but there was not much profit in it.

However all of the Calls expired out-of-the-money, so anyone who did get a trade in kept all the premium. There just wasn’t much of it to keep.

This week

Member content

Hi . Here is the member content for this week.

This week is likely to show some minor weakness after the quadruple witching expiration, especially on Monday. It shouldn’t kill the longer term bullish outlook. We may not see a big rally like the past few weeks; a minor pullback or sideways movement should be expected.

Calls:

Above the 2000 strike price, there is a large volume of Call contracts purchased last week. This indicates that buyers still expect the SP500 index to hold the price above the 2000 level this week. Our system shows that both index and ES shouldn’t close above 2115 level if there is a breakout rally, therefore we look to sell Calls when the price moves above the 2065 level.

Puts:

Under 2000 the strike price, there are more Put contracts purchased than Calls. This could cause a short squeeze if the price breaks above the 2055 level or shorts covering if the index holds above 2010 level. Only if the index moves below 1990 could the selling pressure drive the price down further into the 1975-70 zone. Our system shows that index and ES shouldn’t close below 1950 level, therefore we look to sell Puts when the price goes below 2000.

Put/call volume ratio on SPX and ES March 24 option is 1:5 from 2100 to 2000 level, and 3:1 from 2000 to 1950 level.

Nat’s option trades for this week

 
ExpirationStrike price Sell weekly options when ES price is
March 24, 2016
(Thursday)
2095, 2100 callsPrice is above 2065
2085 calls
Meanline 2050
March 24, 2016
(Thursday)
1950 putsPrice is below 2000
1935, 1925 puts

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