Options – week of May 9, 2016

Last week

Week endingOpenHighLowClose
Apr. 29, 20162091.502094.252045.752060.25
May 6, 20162060.752077.502030.502054.25

Commentary for last week

SP500 index continued the ultra-short-term profit-taking yesterday. It dropped into its 50-day moving average line, but held above it for closing. At the end the ES closed down only eight points for the whole week.

Last week’s trades

160506-ES-60a

ESM6 May 6, 2016. 60-minute bars.

Nat’s trigger points — the areas where she recommends selling Calls or Puts – neatly bracketed the price action last week.

The best trade was on Monday, when enthusiastic buyers pushed the price up to the Call trigger, and increased the premium we could charge for 2105 Calls to a respectable level.

That proved to be the high of the week, and our Calls expired well out of the money, which enabled us to retain the whole premium.

At the other end of the week to trigger for selling Puts was not reached until the last trading day of the week, when the time premium for our weekly calls was almost exhausted.

There were limited opportunities to collect premium, because the RS price bounced quickly on Friday morning. The 2000 Puts also expired OTM.

This week:

Member content:

Hi . Here is the member content for Nat’s option trades for this week.

This week the 50-day moving average line will be key. A failure to hold the index up could lead ES down toward the 200-day moving average line for testing. The ultra-short-term indicators are oversold, so this week we may see a brief oversold bounce.

Calls

Above the 2055 strike price, the 2080, 2090, 2100 and 2125 strike Calls are heavily traded last week. As long as the index doesn’t go below 2040 the price could hold up by going sideways and attempting to gradually move back up to 2080-90, or higher to challenge the 2100 level. Our system shows that index and ES shouldn’t close above 2115 this week;therefore we look for sell Calls when the price moves above 2070.

Puts

Under the 2040 strike price, the 2025 and 1975-70 strike Puts have large open interests and trading volume. The index and the  ES have been unable to fall below 2020 to trigger selling. If that support fails, selling momentum could drive the price down near 1975-70 or lower. Our system shows that index and ES shouldn’t close below 1965 this week; therefore we look to sell Puts when the price goes below 2020.

Put/call volume ratio on SPX and ES May 13 option is 1:2 from 2115 to 2055 level, and 5:1 from 2050 to 1950 level.

Nat’s option trades for this week

ExpirationStrike price Sell options when ES price is
May 13, 20162110, 2115 callsabove 2070
2105 calls
Meanline 2055
May 13, 20162000 putsbelow 2020
1985, 1975 puts

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