Options – week of May 2, 2016

Last week

Week endingOpenHighLowClose
Apr. 22, 20152064.252105.252058.502086.00
Apr. 29, 20152091.502094.252045.752060.25

Commentary for last week

The SP500 index closed up 8.68 points from its April opening last Friday, a small gain for the month. The volume signaled the potential for a reversal last week.

Last week’s trades

160429-ES-60a

ESM6 Apr. 29, 2016. 60-minute bars.

No option trades last week.

The futures made a nice directional move from about 2095 to 2045, and closed around 2060 but the options were not really tradeable last week.

The market was in a trading range from about 2090 to 2080 until the FOMC announcement Wednesday, which limited movement in the options.

The futures managed to close green for that day (as they have almost every Wednesday since the middle of February) then tanked overnight and rallied just as quickly in the Thursday day session.

But the price never hit the trigger for selling Puts until Friday, and by then the time premium was exhausted and the option prices didn’t warrant a trade. There may be better action this week.

This week:

Member content.

 

Hi . Here is the member content for this week:

This week could see a continuation low move. The SP500 index broke two major daily momentum support levels, and it is likely heading toward its major support line 2040 below the current price. But if it can manage to hold above 2030-25 zone, there still is a chance for a price bounce.

Calls:

Above the 2055 strike price, most call contracts are located at the 2080 to 2090 and 2100-2115 strikes. As long as the index doesn’t go below 2050, the price could go up to retest last Friday’s high 2080-75 or higher to challenge 2100 if there is particularly exciting news. Our system shows that the index and the ES shouldn’t close above 2115; therefore we look to sell Calls the price moves above 2075.

Puts:

Below the 2050 strike price, most Put open interests are located at the 2040-2030 and 2000 strikes. The index or the ES could fall into the 2040-30 zone or lower to 2010 in the early days of the week. But if the price drops below 2000 it could trigger one sided selling. Our system shows that the index and the ES shouldn’t close below 1950; therefore we look to sell Puts when the price goes below 2025.

Put/call volume ratio on SPX and ES May 2 option is 1:1 from 2115 to 2055 level, and 3:1 from 2055 to 1950 level.

Nat’s option trades for this week

   
ExpirationStrike price Sell options when ES price is
May 6, 20162110, 2115 calls
2105 calls> 2075
Meanline 2055
May 6, 20162000 puts< 2035
1985, 1975 puts

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