Using Put/Call Open-Interest to Predict the Rest of the Week

freedomfund

Using Put/Call Open-Interest to Predict the Rest of the Week
by admin on September 13, 2010
in Essays/Reports/Articles
1 Comment
Options expire this Friday, so let’s 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’s 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?

SPY (closed 112.72)



Puts out-number calls more than 2.6-to-1, so bearish sentiment remains high.

Call OI is highest between 108 & 115.

Put OI is highest between 95 & 110.

There some overlap between 108 & 110, but I consider it to be irrelevant. Since put OI dominates call OI, let’s focus on the puts. With SPY closing at 112.72 today, barring a big move down the rest of the week, most of the puts will expire worthless this Friday. Max pain will be accomplished right here or a little lower, so a flat to slightly down market is all that’s needed to maintain this.

DIA (closed 105.67)



Puts outnumber calls about 1.7 to 1.

Call OI is highest between 102 & 110.

Put OI is highest between 90 & 102.

Like SPY, put and call OI for DIA has little overlap, and today’s closing price is well above the level needed to expire most of the puts worthless. A move up from here would give call buyers some profits, so max pain at the end of the week would require the market to be flat or slightly down relative to today’s close.

QQQQ (closed 47.25)



Puts out-number calls by 1.6-to-1.

Call OI is highest between 45 & 48 and then there’s a spike at 52.

Put OI is highest between 40 & 47.

There’s definitely some overlap between 45 & 47, and with QQQQ closing today at 47.25, most puts will expire worthless while a few call buyers will make a small profit. A close right here or slightly lower would cause the most pain, so a flat or slightly down market is needed.

IWM (closed 65.27)



Puts out-number calls by 2.1-to-1.

Call OI is steady between 60 & 67 and then there’s a spike at 70.

Put OI is highest between 55 & 65.

There’s some overlap between 60 & 65, but since puts far out-number calls, let’s focus on those. With IWM closing at 65.27 today, most puts will already expire worthless unless the market falls. A move up will give call buyers a little profit, but that profit will be canceled out by additional put losses. A flat market will cause the most pain.

Overall Conclusion: The market has already move to cause the most pain. In each case above, today’s close was very close to the line that separates put and call OI. A flat market would cause the most pain. Slightly down movement would be fine too. A slightly up market would give call buyers some profits but not much. Basically the only thing that will give option buyers big profits is a big move down, so that becomes the least likely scenario.

top枪

sfbayarea

“Puts out-number calls more than 2.6-to-1, so bearish sentiment remains high.”

nnd, put OI 不是这样看的。

noenoe

tomorrow

oldpigwang

Very good, thanks.

lanz

yuxiaohong

I never use put or call option. Good to know the predictive value for the put-to-call option.

sooners

回复 1# freedomfund


   

COS

CondorQueen

回复 1# freedomfund


    I  don't think you know how to read option interests.  With so many put out of money and call in the money, market bias will be trending up in the next three sections.  However, market could also turn to sharply down.

小财虫

好

shoujie

“Puts out-number calls more than 2.6-to-1, so bearish sentiment remains high.”

nnd, put OI 不是 ...
sfbayarea 发表于 2010-9-14 02:45

老大给说说怎么看？

sfbayarea

老大给说说怎么看？
shoujie 发表于 2010-9-15 00:29

    如果只看 put OI volume, 那么下两个月会大跌。。。

MeiTouNao

如果只看 put OI volume, 那么下两个月会大跌。。。
sfbayarea 发表于 2010-9-15 00:42

    WOW

xiaochong

如果只看 put OI volume, 那么下两个月会大跌。。。
sfbayarea 发表于 2010-9-15 00:42

    能再展开解释一下吗？

crasher

Agreed. Closed my QQQQ 46 call today to avoid OE. Tempting to put some stocks instead of index, maybe toward the end of this month.