Discussion in 'Trading' started by intradaybill, Feb 14, 2011.
Take a look at this data for SPY:
Slaughter in the works?
1) Maybe. "It" had better happen very soon for the bears.
2) The lopsided, put-option, open interest is intriguing.
3) A lot of that open interest can be hedged trades, not outright speculative trades.
Open interest is a contrarian indicator.
You want to see vice versa of what you posted to indicate a sell off.
Two replies and both fail to mention that there is no statistical relevance to the open interest in a single instrument, especially when that single instrument is an index and you are looking to anticipate a market-wide move(it is more relevant for a single stock but still not really).
If you want to look at options sentiment make sure you pick a broad measure such as the CBOE index for volume and/or open interest so that you also get open interest in stocks.
I also think the market is "busted" in the sense that patterns that have worked for a *long* time (including option sentiment patterns) are almost completely inversed from how they used to work...
I am wondering if I am thinking what you are thinking - that the large OI on the puts means the MM are trying to hold SPY up at least until Feb expiration (so that those puts they sold to retail all expire worthless) - then maybe they will let it go down?
Is that the general idea?
That is the general idea. A lot of people loaded on puts because of the Egypt situation and despite low share volume, for anyone who watches this market closely, each time it tries to go down buyers show up. Under normal conditions those buyers would let the market go down a little more to get a cheaper price but it seems the payoff form selling options is greater.
But again you never know what will happen after expiration.
Maybe FlyDown got real busy last month .
Seriously, this chart is good news for anyone long near term calls the next couple of days. Its like having built in insurance protecting against a significant retracement in the market. I was expecting the usual down move Wednesday or Thursday but now I'm not so sure its going to happen. A lot of amateurs don't realize how much goes on during option expiry week. You can be damn sure whatever institutions sold all those puts aren't going to let most of them get in the money.
My reply is from 5 years of observation and using spy open interest to trade ES very profitably with 80%+ accuracy.
Last expiration I used spy option interest to generate 15+ es points from thurs night to friday in the es journal with all trades posted in real time.
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