{"id":3132,"date":"2010-06-14T17:35:46","date_gmt":"2010-06-14T22:35:46","guid":{"rendered":"http:\/\/leavittbrothers.com\/blog\/?p=3132"},"modified":"2010-06-14T17:35:46","modified_gmt":"2010-06-14T22:35:46","slug":"using-putcall-open-interest-to-predict-the-rest-of-the-week-6","status":"publish","type":"post","link":"https:\/\/blog.leavittbrothers.com\/?p=3132","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 109.51)<\/span>
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\nPuts out-number calls almost 2-to-1, so bearish sentiment remains.<\/span>
\nCall OI is highest between 109 & 120.<\/span>
\nPuts OI is highest at 116 and below with several very high spikes in the 90’s..<\/span>
\nThere’s lots of overlap between 109 & 116, and since puts out-number calls, a close in the top-half of the range would cause the most pain. But unlike previous months, someone will make money – there’s no place to close were most options will expire worthless. Given Monday’s close at 109.51, the market needs to move up a couple points<\/strong> to cause the most pain.<\/span>
\nDIA<\/strong> (closed 102.14)<\/span>
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\nPuts and calls are equal.<\/span>
\nCall OI is highest between 101 & 105 and then again between 111 & 114.<\/span>
\nPut OI is highest between 98 & 102.<\/span>
\nThere’s a little overlap in the 101-102, so a close right there would cause the most pain. With today’s close at 102.14, the market can’t move up too much more the rest of the week<\/strong> or else the call holders will actually make money. But high DIA OI is 10K…much less than the 100K which is routine for the SPY. So even if DIA call buyers make a few bucks, they may not make enough to compensate for the losses from SPY call buyers.<\/span>
\nQQQQ<\/strong> (closed 45.49)<\/span>
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\nPuts out-number calls by 1.4-to-1.<\/span>
\nCall OI is highest between 45 & 50.<\/span>
\nPut OI is highest between 40 & 48.<\/span>
\n There’s overlap between 45 & 48, and since puts slightly outnumber calls, a close in the upper half of that range would cause the most pain. With today’s close at 45.49, the market needs to move up a little the next couple days<\/strong> to accomplish the mission.<\/span>
\nIWM<\/strong> (closed 65.35)<\/span>
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\nPuts out-number calls by 3.3-to-1.<\/span>
\nCall OI ramps up between 63 & 72 with 70, 71 and 72 being the highest.<\/span>
\nPut OI is highest between 57 & 72 with the highest ticks occurring at 61, 62 and 64.<\/span>
\n The most obvious overlap comes in the area of the high call OI spikes (70-72), but since the put OI is so much higher than the call OI, let’s focus on the puts. The higher the close, the better, and with IWM closing at 65.35 today, a move up is needed, but as long as the market doesn’t move down much<\/strong>, most of the put owners will lose.<\/span>
\nOne more just for fun.<\/span>
\nTZA<\/strong> (closed 6.85) – this is 3x inverse small cap ETF.<\/span>
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\nCall OI continues to dominate.<\/span>
\nCall OI is highest at 6, 7, 8 and 9.<\/span>
\nPut OI is highest at 6 and 7.<\/span>
\nA close in the mid 6’s would cause lots of pain. There may be a few call buyers at strike=5 that make money and a few put buyers at strike=8 that make money, but overall, most would lose. With the stock closing at 6.85 today, a small move down (which means the market moves up) is needed the next couple days<\/strong>. <\/span>
\nOverall Conclusion:<\/strong> The bears continue to trade in anticipation of a big move down and as of today’s close, they’ll make a couple bucks, but not too much. A move up the next couple days would cause more pain, <\/span>
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