{"id":2557,"date":"2010-01-11T12:41:57","date_gmt":"2010-01-11T17:41:57","guid":{"rendered":"http:\/\/leavittbrothers.com\/blog\/?p=2557"},"modified":"2010-01-11T12:41:57","modified_gmt":"2010-01-11T17:41:57","slug":"using-putcall-open-interest-to-predict-the-rest-of-the-week","status":"publish","type":"post","link":"https:\/\/blog.leavittbrothers.com\/?p=2557","title":{"rendered":"Using Put\/Call Open-Interest to Predict the Rest of the Week"},"content":{"rendered":"

Options expire this Friday, so let\u2019s take a look at the open-interest on SPY, DIA, QQQQ and IWM to see if they hint at movement the rest of the week (this was written during the day Monday, so it uses data from over the weekend). Here\u2019s the theory: the market conspires to cause the most pain, to cause the most number of people to lose the most amount of money. If the market is to accomplish this, what does it need to do this week?<\/span>
\nSPY<\/strong> (closed 114.57)<\/span>
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\nPuts outnumber calls 2.5-to-1.
\nCall OI biggest between 110-117.
\nPut OI biggest at 113 and below.<\/span><\/span><\/span>
\nWith SPY closing in the mid 114’s, any more upside from here will help generate decent profits for the call buyers, and with the big block of put OI starting at 113, we don’t want to see a drop too far below that. To cause the most pain, a close around 112\/113 – about 1.5 points below the weekend close – will do the trick.<\/b><\/span>
\nDIA<\/strong> (closed 106.11)<\/span>
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\nCalls outnumber puts by a small margin.
\nCall OI biggest between 105-117 and then way over on right edge between 170 & 200.
\nPut OI is steady between 95-106.<\/span><\/span><\/span>
\nThis is the first month in many calls have outnumbered puts for any of these ETFs. There’s some overlap between the call and put OI around 105\/106 which is slightly below the closing price (106.11). A flat to slightly down market this week will close most of these options worthless<\/strong>.<\/span>
\nQQQQ<\/strong> (closed 46.55)<\/span>
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\nPuts outnumber calls 1.75-to-1.0.
\nCall OI biggest between 40-48.
\nPut OI is high at 46 and below with a couple huge spikes at 40 & 43.<\/span><\/span><\/span>
\nThere’s some overlap between 46 & 48, and with the ETF closing at 46.55, a flat to slightly up market will cause the most pain<\/strong>.<\/span>
\nIWM<\/strong> (closed 64.52)<\/span>
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\nPuts outnumber calls by 4-to-1.
\nCalls biggest between 59-67.
\nPuts biggest at 65 and below.<\/span><\/span><\/span>
\nThe call OI is almost irrelevant here because the put OI is so big. In fact I’ve never seen it this one-sided. With IWM closing in the mid 64’s, it can’t move down too much or else some of the put buyers will make a few bucks. Flat to slightly up trading<\/strong> is best.<\/span>
\nOverall Conclusion:<\/strong> Once again the bears aggressively bet on the downside, and barring a massive sell-off, they\u2019ll once again be wrong. Overall, flat trading would cause the most pain<\/strong>.
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