Charts - Options Week Jan. 23rd

this was an amazing week, the markets had an amazing week... if you look at open interest, you can see where the market had to go... now, we are "over extended" as it pertains to where the market should pin options expiring tomorrow. Based on OI only, we should close below 205.

can you see why TLT faded, once it hit 135?

 

and finally.....My favorite trade of the week....TSLA for the win!

 

can you see why TSLA climbed its way to 200+ ?

 

that's all for now.

tb

 

 

 

 

SPY Chart - Options Week

Options expiration week had tells that reveal the directional price bias.

take a look at the intraday chart below for options week, and compare to the open interest above.

There were a number of ETF, stocks, that pinned their price near OI at close during Options Ex. week.

TLT had largest OI in 134 calls. TLT closed < 134. Check!

AAPL had largest OI in 105 puts. AAPL closed > 105. Check!

SCTY surprised me, and opened on Friday at 50, near largest OI for calls/puts.

Then, proceeded all day to target the 48 puts, which had next largest OI.

Closed > 48. 

Conclusion? If the opening price is where the price should be pinned, then it has no where to go! So, logical conclusion is to find next largest OI, and target that price.

BABA opened at 96 on Friday. The next largest OI was in calls, at strike 97.50.

Guess what the high of day was? 97.70!

In fact, it bumped up to 97.50ish, twice.

In conclusion, I will be looking for large OI for February, to determine direction of ETF, stocks, and general market direction.

tb

USO Trading plan for next week - JAN 16

I bought RIG today, @ 16.28. Technical pattern - Double Bottom + the oil potential to move 10% next week...Option Monster trader jumped in today too, so I am in good company...

trading ideas:

sell USO OTM puts 18 and below.
sell USO OTM calls 22 and higher.
buy USO ITM calls, 18 and below.
all expire next Friday.

or
buy USO at 18.50 and hold for 20 to 22.
buy HAL, CVX, COP, XOM, or RIG... Solars could also move: SUNE, FSLR, SCTY..

tb

TSLA trading plan... Update 1/6/2015

TSLA trading plan for next 2 weeks is based on Open Interest (OI), and where I suspect the MM (market makers) will take this stock price by the end of this week, and the following week. Having this plan in place ahead of the trading week gets me prepared.

for week of 1/9-
Short TSLA at 220ish. Buy 220, 222.50, or 225 puts.

If TSLA > 220, stay out, exit short position.
if TSLA near 210 before 1/9, close short position.
if TSLA < 210 before 1/9, close short position, go long position with 200c.

for week of 1/16-
Short TSLA at 210ish. Buy 210, 212.50, or 215 puts.

if TSLA > 210, stay out, exit short position.
if TSLA near 200 before 1/16, close short position.
if TSLA < 200 before 1/16, close short position, go long position with 190c.

done.

now, lets see what happens.

tb

UPDATE: JAN 6, 2015

TSLA price movement:

Target of 210 met.
gap filled at 205.

 

 

 

 

 



TSLA Trade during options expiration week....

 

Options expiration week happens each week, but it's the 3rd week of month that is most critical, and more importantly, the triple witching week which is most critical.

DEFINITION of 'Triple Witching'

An event that occurs when the contracts for stock index futures, stock index options and stock options all expire on the same day. Triple witching days happen four times a year on the third Friday of March, June, September and December.

This phenomenon is sometimes referred to as "freaky Friday".

INVESTOPEDIA EXPLAINS 'Triple Witching'

The final trading hour for that Friday is the hour known as triple witching. The markets are quite volatile in this final hour, as traders quickly offset their option/futures orders before the closing bell. If you are a long-term investor, triple witching will have a minimal impact on you.

Triple Witching months...

MARCH
JUNE
SEPTEMBER
DECEMBER

During the 3rd week of the month, stock prices tend to be drawn towards the largest open interest by expiration Friday.

In the case of TSLA, it was the $220 strike. Knowing this ahead of time is important, as you can plan accordingly.



However, analysts on TSLA had other plans in mind for this week...or did they?

But, notice the stock price for TSLA had bottomed on Wednesday, 12/17...

 

 

 

With all that bearish news, why would TSLA ever go up in price?
Answer: Options Expiration week.

The $212.50 strike calls were $0.45 at the open.
They closed at $0.75 on Wednesday. Almost 100% return, not bad...

but, Thursday, 12/18, the stock jumped 6% to 218ish. Calls closed at $6.40!

a $450 investment from Wednesday's opening low, turned into $6,400, by closing bell, in just 2 days.

Happy Holidays!

tb

USO Chart... closing in...

closing in on the round number $20 for USO... but, I would expect the market to take it lower than $20, before the major bounce....

tb

TWTR Chart

It looks like TWTR might be looking to fill a gap... Intraday trading is showing 39 as resistance. To be safe, if it can break 39, it increases the probability of a gap fill at 47. Nice 20% move from here.

tb