Options – week of Nov. 23, 2015

Commentary for last week

ESZ5 prices, week ending Nov. 20, 2105
Week endingOpenHighLowClose
Nov. 202006.502094.501998.502088.75
Nov. 132092.002097.752011.502013.00

The terrorist attack in France changed the mood in our market, but the Plunge Protection Team was on the job early and helped to prevent panic selling at the beginning of week. Later in the week the FOMC minutes showed stronger support for an interest rate hike in December. One effect will be to increase the flow of foreign funds into US securities. The Fed sent a clear signal to the world: “The US is the safe place for your money.”

The market marched up most of the week, but closed just below our first strike price. There was no opportunity to sell Puts, but we sold Calls with strikes at 2095, 2100 and 2110. All expired OTM and we kept the entire premium.

Here’s the annotated chart:

151120-ES-60

Nat’s option trades, week ending Nov. 20, 2015

This week:

We are moving into the favorable season for stocks . When there is lot of uncertainty around the world, the US stock market becomes an attractive place to invest and trade.

This week we have the market closed for the Thanksgiving holiday on Thursday, and barely open on Friday (it closes at 1 pm). We may see some weakness. But overall it shouldn’t change short-term uptrend direction.

Member content

Here is the restricted members-only content for this week.

The market is effectively only trading for three days this week, which will limit the opportunities for option trades. We may find the trading compressed into the shorter time period, and we may find some abnormal trading Friday – when the volume will be light – that could affect option expiration. Be a little cautious about this.

Calls:

There were lots of Calls bought above the 2065 strike price. The 2065 level will be the key line for this week. As long as ES stays above 2050 level, the buyers will keep pushing ES up to 2100-2110 or higher. Our system shows that ES could be pushed up to 2130 level or higher , but it shouldn’t close above 2180 level. We are looking to sell Calls when the ES moves above 2110.

Puts:

The Puts have been heavily bought at 2050 and 2025 strikes. If ES moves under 2000 level, it could cause the balance to change swiftly towards downside; selling could accelerate and push the price lower toward 1975-50. Our system shows that ES shouldn’t close below 1950 level, therefore we look to sell Puts when thr ES is below 2050.

Nat’s option trades this week

ExpirationStrike price Sell options when ES price is:
Nov. 27, 20152165, 2175 Calls
2155 CallsAbove 2110
Meanline 2070
Nov. 27, 20151985 PutsBelow 2050
1970 Puts