What happened on last Friday?

The last Friday, $QQQ jumped beefy 2.91% and led the market. There was no doubt that the earnings from $AMZN and $GOOG fueled the NASDAQ composite index.

In this article, I would like to leave some comments from option market perspective. First, let's see the Open Interest chart from our #optionM8 app.

QQQ OI 171103

As you can see, there are HUGE SHORT positions at 150C.

If you check the 5min chart of QQQ 171103 150C, you will find that someone sold 34000 of 150C at $1.24 between 10:45 and 10:50 on this day. That is $4.2M of bet for QQQ closing below 150 on next Friday.

Coincidentally, QQQ started surging immediately after this 150C was sold to open. One can argue that this call seller was forced to buy cash QQQ for delta hedging. If this were the case, we could ignore this 150C open interest, however, if this seller has big balls, QQQ would pull back to 150 or less by next Friday so that the 150C seller could pocket $4.2M of premium.

Remember. Selling CALLs is highly risky business, unless it's hedged, or, ... the seller would know something we don't know. I won't get surprised if I see QQQ would pull back to 150 level by next Friday.

There was one more interesting thing on last Friday. RSP, equal weighted version of SPY, ended flat and negative on weekly chart.

RSP Daily

RSP Weekly

What do those chart mean? They mean less stocks are pushing up SPY. The momentum is definitely weakening.

The next chart is SPY:RSP ratio. I added B-Band to see how the last Friday was unusual.

SPY:RSP Ratio daily

This ratio has strong mean reversion and usually ends up inside of B-Band, however, this ratio rallied on Friday and ended up ABOVE the B-Band. I scanned past five years of data but I couldn't find similar case.

If we can expect mean reversion for SPY:RSP, we would see QQQ's pullback this Monday or Tuesday. Since much of SPY's advance last Friday was accounted by QQQ, we could expect SPY's pullback as well.

SPY OI 1101

SPY OI 1103

For the OI Wednesday, it's pretty much biased to PUT long side. It usually works as support, since those long put holders would close their position before expiration. (When many puts were sold, the stock price tends to rise.)

The problem is in 1103 OI. There are HUGE 257C LONGs as well 257P SHORTs. Those 257C longs would start closing their position once SPY starts pull back. When many calls are sold, the stock price tends to decline.

SPY 1103 257P 5min

Then I would like to point out that somebody SOLD 10000 of 1103 257P at $0.73 last Friday between 12:00 and 12:05. SPY 1103 257P closed 0.67 last Friday and it's OTM for now.

If SPY breakdown 257 and SPY 1103 257P moves above $0.73, which is not so far away, the seller of 257P would start selling cash SPY or buying back 257P, ether of those options creates down pressure on SPY.

The good news is that there are lots of 256P Longs floating and they would close their position once there 256P rises back above VWAP. We would find relatively strong support between 255 and 256 next week.

Happy Trading.

SPY Option Market Analysis 20170111

Wrap up for today

Yesterday I wrote

Most of those 226P was bought today at 0.2 level, ant VWAP is around 0.4.  Those 226P holders may hold the position even after the price exceeds VWAP, because puts are too cheap now. Do you set stop-sell for lottery ticket? I don't.

SPY 0111 226P 5min

Indeed, SPY was sold as Trump talked at conference, and the VWAP 0.40 worked as resistance, and I thought the third attempt would break the VWAP. I was wrong.

SPY 0111 226P 5min after Trump

The breakout was fake and I lost my bet. I should have stayed at my discipline. Don't be too greedy.

Tomorrow and beyond

SPY 0113 OI

The price based OI (3rd row) for Friday looks slightly bullish. 228.5C would become as resistant level.

SPY Option Analysis 20170109

SPY option analysis: week of 20170109

Last week, I wrote a bearish tone of article but obviously I was wrong. The turning point was Wednesday when 0106 SPY 227C started getting squeezed. I usually follow those big option traders but they are not always correct, and once their bets go wrong, the market moves quickly because they need to wind up their big positions.

SPY OI Wednesday

The market would be quiet by Wednesday as price base OIs are small. If there are any battle between bears and bulls, then SPY 227 is a good level as both of call and put are net long at this price, but positions are small so don't expect a big battle.

SPY OI Friday

Friday expirations are slightly bigger than Wednesday, but again those are small and I can't say anything at this moment.  The earning season starts Monday kicked of by AA, but we need to wait for a week to many earning reports kick in, then Trump will officially start his job in the Whitehouse. Do we see another "Buy the rumor Sell the news" thing?

I would stay away from the market this week. Happy Trading.

Shameless Advertisement: Above charts were created by our OptionM8 app. You can download it free from Google Play or iTunes store.

Morning preview 2016/12/19

Good morning.

On SPY's Value Based Open Interest chart, I would like to point out two positions, 221 C (Long) and 230 P (Short).

Let's see the 221C on Daily Chart. Most of the Longs are bought on December 8th, and that buyers were still in profit last Friday, but the margin is narrowing. We could expect this Call holder would close the position by Wednesday.

On the other hand, 230P was sold to open on December 14th, the Put price has not decreased so much. If SPY price can not rise, the seller might start closing this position.

Overall SPY seems to be heavy until Wednesday.

OptionM 8 new version

OptionM8 new version

We released a new version of OptionM8. 

• Android version
• IOS version 

In this version, we made it possible to display value-based OI. We also made it possible to display VWAP (volume load moving average) on option price chart(daily, 60 minutes, 5 minutes and 1 minute). These functions are unique to OptionM8.

Based on the value-based OI, you can estimate whether a certain strike is Net Long or Net Short, and how much their positions are.

Also, by looking at the VWAP of the daily options chart, you can see how much profits/loss are on the long side or short side.

If a net-short strike enters ITM, those sellers would be in red and they are likely to buy back those  options. In other words, the probability of option price rise increases.

Tap Open Interest from the lower screen menu
Select Ticker and Expiry from the top right menu 
→ Open Interest charts are displayed 

The Value-based OI is in the 3rd row.
Calls are green and Puts are red.
You can see 221.5 Call and 222 Call are net short

Select Daily Chart from the bottom menu
Then select Ticker, Expiry, Call/Put, and Strike Price from the top-right menu
→ The Daily charts are displayed

The second row is the Call's daily chart
The red line is Bid-based VWAP and the red line is Ask-based VWAP
As you can see, Calls are way above the VWAP and shorts are in loss,
therefore you could expect those calls are "buy" in the intraday dip.

Conversely if the net long Strike is in OTM and those longs are in red, they have a high probability of "sell the blip" somewhere near VWAP. If it is Call, that strike price would be a strong resistance of stock price, and if it is Put, that strike price would work as strong support of stock price.

Select OI from the bottom menu then select Ticker and Expiry
from the upper menu of the screen to display OI charts

The 3rd row is the value-based OI chart.
You can see that 219 Put is significantly long.

Let's see how the 210 Put is working...

As you can see, that 219 Put is below VWAP and longs are in loss.
If SPY drops to 219 level, you could expect strong "buy" opportunity.

The pricing OptionM8 is as follows:

• Guest users can display OI charts, daily charts, and intraday charts for SPY only one expiration and one strike. Guest users would see advertisements.
• Guest users can upgrade to Free tier by logging in though Twitter. Free tier users can display OI charts, daily charts, and intraday charts for SPY, QQQ, and IWM with next two expirations and three strikes. Advertisements would be displayed.
• Free tier users can upgrade to Basic tier by subscription. The price is $49.99/month. Basic users can display those charts with more expirations and strikes.

2016/06/27 SPY Options Wrap Up

Outlook

The market is digesting the impact of BRexit. In Japan, some critics are saying BRexit is much worse than 2007 financial crisis. I think BRexit is not that bad, but cheaper £ definitely gives US companies less sales from UK region.

At this moment, nobody knows how big BRexit's impact is, therefore we should ask to the market that can magically guess anything.

Right now, S&P500 is oversold in short term so we can expect some rebound here, however, under this uncertain situation, we can't expect enough buyers show up therefore "Sell the blip" would be the right tactics, and SPY 203 level would lure those sellers.

SPY today

SPY 5m

SPY gapped down again and it showed beautiful positive divergence and suggests short term bottoming. The problem is similar positive divergence was observed last Friday. 

SPY 1h

Above is SPY 1hour chart and it shows us how steep this decline was. Those indicators such as RSI or PPO suggest very short term bottoms is in. The upper side of Raff Channel is coincidentally same level as 0.382 fib and it's reasonable target for near term rebound. If SPY can't get buyers at this level, 203, sellers will show up.

$NYAD

$NYHL

SPY:RSP

$SPX CVI

$SPX STVO

$SPX VTO

CVI is -2σ and suggests near term rebound. 

SPY OI 06/30

SPY OI 07/01

SPY OI 07/08

SPY DWV 06/30

SPY DWV 07/01

SPY DWV 07/08

There are two expirations this week and 06/30 had lots of Put selling today while 07/01 had Put buying. There are still ITM puts for 06/30 and we can expect delta hedge selling if SPY can't recover 205 level by Wednesday.

Extra: S&P500 components

Long watch list...DPS

DPS

Short watch list...SPLS and ZION

SPLS

ZION

2016/06/20 SPY Options Wrap Up

Outlook

We expect SPY's new high this week. I don't know the result of BRexit vote yet, but we already know the market went too bearish past weeks.

SPY today

SPY 5m

SPY opened with big gap up, but it couldn't hold that level and puked out 0.382 of gain from Thursday low. It might have been a buy at the close today.

$NYAD

$NYHL

SPY:RSP

$SPX CVI

$SPX STVO

$SPX VTO

• CVIは大幅反発。超短期な買われすぎまではまだ余裕あり。
• STVOは続伸。STVOがプラ転すれば短期的モーメンタムは上に。
• VTOはプラス圏で反発。中期的なモーメンタムも上に。
  
  →BRexitというイベントはありますが、S&P500は最高値更新の準備が整いました。

CVI surged today but it still has a room for short-term overbought. STVO is about to turn positive. VTO rebounded at positive level. Those indicators suggests new ATH is right at the corner.

SPY OI 06/24

SPY DWV 06/24

From OI charts, we can read SPY is at the max pain level right now.

Extra: SPY long watch list

AFL, MRO, QRVO, ACN, EMR and LRCX for tomorrow.