{"id":2808,"date":"2010-03-15T16:27:28","date_gmt":"2010-03-15T21:27:28","guid":{"rendered":"http:\/\/leavittbrothers.com\/blog\/?p=2808"},"modified":"2010-03-15T16:27:28","modified_gmt":"2010-03-15T21:27:28","slug":"using-putcall-open-interest-to-predict-the-rest-of-the-week-3","status":"publish","type":"post","link":"https:\/\/blog.leavittbrothers.com\/?p=2808","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. 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 115.49)<\/span>
\n\"\"
\nPuts out-number calls by 2.3-to-1, so there’s lots of bearish sentiment out there.<\/span>
\nCall OI is highest between 107 & 120.<\/span>
\nPuts OI is highest at 115 and below.<\/span>
\nGiven the dominance of puts, if we want to know what the market must do to cause the most pain, let’s focus on the puts and ignore the calls. With the stock closing at 115.49 today and put OI being highest at 115 and below, a flat market the rest of the week<\/strong> would expire all these puts worthless – a very painful situation for the bears who bet on a big downside move. <\/span>
\nDIA<\/strong> (closed 106.57)<\/span>
\n\"\"
\nSimilar to the last two months, put and call OI for DIA is equal.<\/span>
\nCall OI is highest between 104-110 with spikes at 108 and 110.<\/span>
\nPut OI is highest at 107 and below.<\/span>
\nWith overlap between 104-107, that’s where DIA needs to close Friday to frustrate the most number of people. The stock closed at 106.57 today, so flat-to-slightly-down trading this week<\/strong> will do the trick.<\/span>
\nQQQQ<\/strong> (closed 47.24)<\/span>
\n\"\"
\nPuts out-number calls by 2-to-1.<\/span>
\nCall OI is highest between 44-49.<\/span>
\nPut OI is highest between 40-48 with the biggest spikes being at 43 and 44.<\/span>
\nThe zones overlap between 44-48, and since puts far out-number calls, a close in the upper half of this range will cause the most pain. With the stock closing at 47.24 today, a flat market the rest of the week<\/strong> is what’s needed to close the most number of calls and puts worthless. <\/span>
\nIWM<\/strong> (closed 67.49)<\/span>
\n\"\"
\nPuts out-number calls by 2.5-to-1.<\/span>
\nCall OI is highest between 59-69 with spikes being at 63 and 64.<\/span>
\nPut OI has spikes at 50, 54, 59, 60 and 62 and a few smaller spikes at 63, 65 and 67.<\/span>
\nSince puts far out-number calls, let’s focus on those to determine what the stock needs to do this week to cause the most pain. A close at 67 would of course close all these put spikes worthless, and a close slightly lower would do the trick too because being slightly in-the-money still won’t enable the buyers of 67 puts to make money. With the stock closing at 67.49 today, a flat market would accomplish the mission<\/strong>.<\/span>
\nOne more just for fun.<\/span>
\nTZA<\/strong> (closed 7.39) – this is 3x inverse small cap ETF.<\/span>
\n\"\"
\nCall OI out-numbers put OI by almost 15-to-1, so lots of traders are betting on the market dropping (which would cause this stock to rally).<\/span>
\nCall OI is huge between 7-10.<\/span>
\nPut OI is relatively small between 8-10.<\/span>
\nObviously a close at 7 would expire all those calls worthless, but a small move up from the current level wouldn’t give the call buyers a profit because the stock wouldn’t be far enough in-the-money. A flat-to-slightly-up market would cause the most pain<\/strong>.<\/span>
\nOverall Conclusion:<\/strong> The bears have once again bet big on an expected move down. Given the put\/call OI zones for each of these stocks and Monday’s closing levels, a flat market the next couple days<\/strong> will cause the most pain. <\/span><\/p>\n","protected":false},"excerpt":{"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. 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. […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/posts\/2808"}],"collection":[{"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2808"}],"version-history":[{"count":0,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/posts\/2808\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2808"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2808"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2808"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}