Options – week of May 16, 2016

Last week

Week endingOpenHighLowClose
May 6, 20162060.752077.502030.502054.25
May 13, 20162053.002079.752038.502042.50

Commentary for last week

SP500 index continued its ultra-short-term correction last week. It failed to push the price back above the 1300 level and closed at the low range of the week. It continued to struggle around the 20-day moving average support line.

Last week’s trades

160513-ES-60a

ESM6 to May 13, 2016. 60-minute bars.

The ES made a bounce early in the week, which encouraged the bulls to crawl back into the market in hopes the short-term retracement was finished.

The price moved above Nat’s tricgger for selling Calls early in the week, and optimism allowed us to get decent premiums for the Calls we sold.

But by the end of the week to price dropped back down and the Calls we sold all expired OTM. We retained the entire premium.

This week

Member content

Hi . Here are Nat’s option trades for this week.

This week is likely to see a strong movement in the early days. SP500 index has two options expiring on May 18 and 19 and the ES option will expire on May 20. Major option expirations can rock the market.

Calls:

Above the 2050 strike price, Calls with strikes at 2075, 2100 and 2125 are heavily traded last week. As long as the index doesn’t go below the 2030 level, the price could hold up and attempt to push price back up to 2075 or higher to challenge the 2100 level. Our system shows that index and ES shouldn’t close above the 2125 level this week; therefore we look to sell Calls when price moves above 2070.

Puts:

Under the 2030 strike price, Puts with strikes at 2025 and 2000 have large open interests. The index or ES needs to hold above the 1990 level to prevent triggering selling. If it breaks below 1990, selling momentum could send the price down near the 1970-50 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 May 20 option is 1:3 from 2115 to 2035 level, and 5:1 from 2050 to 1950 level.

Nat’s option trades this week

   
ExpirationStrike price Sell options when ES is
May 20, 20162110, 2115 calls> 2070
2100 calls
Meanline 2030
May 20, 20161975 puts< 2000
1965, 1950 puts

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