{"id":5619,"date":"2012-05-14T16:08:52","date_gmt":"2012-05-14T21:08:52","guid":{"rendered":"http:\/\/leavittbrothers.com\/blog\/?p=5619"},"modified":"2012-05-14T16:08:52","modified_gmt":"2012-05-14T21:08:52","slug":"using-putcall-open-interest-to-predict-the-rest-of-the-week-29","status":"publish","type":"post","link":"https:\/\/blog.leavittbrothers.com\/?p=5619","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, QQQ 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?
\n<\/span>
\nSPY<\/strong> (closed 134.11)<\/span>
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\nPuts out-number calls 2.3-to-1.0 – slightly less bearish than last month.<\/span>
\nCall OI is highest between 136 & 146.<\/span>
\nPut OI is highest between 125 & 140. <\/span>
\n There’s ovelap between 136 and 140, and it’s noteable the call strike with the greatest open-interest is also the top of the high OI put zone (140). Puts out-number calls, so a close between 138 and 140 would cause the most pain. With today’s close at 134.11, the market would have to rally<\/strong> to accomplish this. As of now, some of those higher-striked put buyers will make money. <\/span>
\nDIA<\/strong> (closed 126.95)<\/span>
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\nPuts and calls are about equal – much less bearish than last month.<\/span>
\nCall OI is highest at 123 and between 129 & 133.<\/span>
\nPut OI is highest at 121, 123 and between 125 & 130. <\/span>
\n These numbers don’t matter because DIA call OI (~ 175K contracts) is so much less than SPY OI (~ 4 million). Nevertheless, these numbers suggest a close around 129\/130 is needed to cause a lot of pain (although it’s hard to say where max pain is). DIA closed at 126.95 today, so a move up<\/strong> is needed.<\/span>
\nQQQ<\/strong> (closed 63.58)<\/span>
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\nPuts out-number calls 1.2-to-1.0 – less bearish than last month.<\/span>
\nCall OI is highest between 65 & 70.<\/span>
\nPut OI is highest at 60 and between 63 & 66.<\/span>
\n Put and call OI are about equal, and there’s clear overlap at 65\/66. Hence a close there would cause the most pain. Today’s close was at 63.58, so a move up<\/strong> is needed.<\/span>
\nIWM<\/strong> (closed 77.85)<\/span>
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\nPuts out-number calls 2.0-to-1.0 – the same bearishness as last month.<\/span>
\nCall OI is highest at 85, and it tapers off in both directions for several strikes. <\/span>
\nPut OI is highest between 75 & 80 and a couple strikes below 75.<\/span>
\n Instead of overlap, there’s two distinct zones, so picking the max pain strike is easy – the one in the middle, which is ~ 81. IWM closed at 77.85 today, so a move up<\/strong> is needed. <\/span>
\nOverall Conclusion:<\/strong> The bears again bet on a market drop, and as of now, they’ll make some decent coin. In all cases above, the market would need to rally<\/strong> – in some cases several % – to cause max pain. Congrats to the bears.<\/span>
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