Brace For Stock Options Expiry (OPEX) Friday ๐
17% gain from taking puts after the opening reversal. The monthly stock-market options for August are set to expire on Friday, potentially spurring more volatility in stocks after a bruising three-week run.
โ ๏ธ Trading tips: Looking at QQQ puts under 357.6 and calls above 361, SPY puts under 435.5 and calls above 439 (both risky to long). Scale down on OPEX Friday after a tough week. Trade safe and enjoy the weekend!
Downward trend
U.S. stock option contracts with a notional value of $2.2 trillion are set to expire on Friday, Aug 18. As stocks have stumbled in August, option traders have been buying put options and selling call options.
As a result, dealers could be forced to hedge their positions by buying futures if stocks rise and their customers close out their short-call positions, or selling futures to hedge the risk of puts moving into the money. This would serve to exaggerate the market's move in either direction, driving a rising market higher and a falling market even lower.
August weakness continues
Dealers could hit "peak short gamma" if the S&P 500 falls to 4,320, sending a wave of puts into the money. If that happens, it's possible dealers could slam stocks lower as they rush to avoid being on the hook for puts sold to customers. The S&P 500 SPX finished Thursday at 4,370.36.
Gamma is used by options analysts to describe how quickly an option's delta changes. Delta represents how sensitive the price of an option is to moves in the underlying asset. When options are about to expire, delta typically increases dramatically, since small moves that put it closer to being in or out of the money can have a dramatic impact on the option's price.
U.S. stocks finished lower on Thursday, with the S&P 500 and Nasdaq Composite poised to record a third straight weekly decline, what would be the longest such streak for the S&P 500 since February.
Bear is back for a vengeance
The S&P 500 was off by 0.8% on Thursday, while the Nasdaq Composite COMP fell by 1.2% to 13,316.93. The Dow Jones Industrial Average DJIA shed 290.91 points, or 0.8%, to 34,474.83.
In addition to monthly options expiring Friday, weekly options known as "zero days until expiration" or "0DTE" options could further complicate the market's reaction. A veteran Goldman Sachs Group strategist warned earlier this week that 0DTE traders have been limiting upswings in stocks while piling on the pressure when markets sink.
A prelude can be seen after the mid day on Thursday. The price action was rejected at the vwap and fell all the way to the close. Could we witness a repeat on Friday since options are expiring causing traders to close, rollover or hedge their positions intensifying more downward pressure?
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Raising interest rates mean economy is doing great. Only like Mainland China would lower interest rates because their economy is not doing great.
Longs are getting shellacked, the unjustified bull run of the last 3 months is over now that's for sure.
NVDA hit 520 after hours earnings nite, and now down to 450. Quite a rug pull for those FOMO buyers who were looking for 550.
Interest rates are gravity to equities. The big short is dangerous
So definately expect a further decline
Bearish for nowโฆprobably mid September.
Great week!!! making money and enjoy watching bears โsmartโ analysis losing money! Going to enjoy party! Have a great weekend bulls
QQQ has been running slightly lower than nasdaq. Time to look for another index fund that emulates nasdaq.
Feels like those 361 calls at .95 will get better thru last part here had 60 so thatโs bummer
QQQ $250 Definitely in play !
Looks like a squeeze. A lot of shorts got caught with pants down on the dip.