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Tuesday, November 21, 2017

Daily update 11/21 SPY open interest data

New highs!

The world felt pretty good overnight and so the market gapped up and ran up until 11 AM.  Breadth was +64% after peeking out at +71%.  New highs expanded to 234.  New lows were stable at 30 and once again are elevated for a new high.

The futures made the upper channel line target today.  They closed above it for 2 bars so far.  It remains to be seen if they can stay out there or come back in tomorrow.  If we go higher tomorrow we are in accelerated up move mode.

The green count hit 50 on the nose.  It was not up all that much considering the price movement in the index.  There is a pretty big negative divergence in the intermediate indicator.  That would only be a problem if the market turns back down.

Over the years I have occasionally got charts from Shaeffer's research showing the open interest for SPY at the next monthly expiration.  An abundance of call options over put options at a particular strike can provide resistance.  If SPY gets through that price level during expiration week it will often accelerate to the upside in what they call delta hedging.  The same hold true for puts.  A big number of puts at a particular strike often is support.  If SPY gets below that during option expiration week it often accelerates down with delta hedging.  I have always found this chart interesting, but I rarely get to see it.  I found that the CBOE site would let me download SPY option data in a text file.  After looking at the data I figured out it was a lot of work to manually get the 20 lines of data I need out of nearly 37000 lines in the file.  Lucky for me I used to be programmer so while the market was doing nothing this afternoon I wrote some code to get the data.  Here is the chart with data as of today. 

This is the Dec. expiration data.  First off there are way more strikes with more calls then puts then I am used to seeing.   Second of all SPY is already well above the 255 strike where the calls and puts balance out.  All strikes above 255 have more calls outstanding.  I don't know how much this data changes between expirations.  I have never seen it twice in front of the same expiration.  I thought we could all learn together on this one.  I will show it every Friday to see what happens.  Right now we have put support at 255.  We have option related resistance from 256 up.  It would not be surprising if we have a pullback between now and that Dec. expiration on the 15th.

We have had two strong days when global markets were also strong and two mixed days when global markets were mixed.  Where does that leave us?   The advance/decline line made a new high today which is supposed to mean nothing too bad will happen if there is a pullback.  That suggests this high should be retested at some point.  Global markets could start going down again and bring out a few sellers. We are in the longest period without a 3% pullback in SPX ever so some pullback would be way overdue anyway.  


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.