U.S. stocks rose, though bets grew that the U.S. central bank might delay cutting interest rates this year, with higher Treasury rates limiting gains in major indexes. Swap rates suggest the Fed will cut rates by about 60 basis points this year, so two cuts are the most likely outcome. On Friday, the odds of three rate cuts remained above 50%.
According to the latest trading data in the options market, investors are taking a wait-and-see approach to equities in the near term and remain cautiously optimistic about the next month or two.
For the S&P 500ETF SPY, overall market sentiment is slightly bearish, with put options outnumbering call options by open interest. The largest volume increase was in put options expiring on May 17 with a strike price of 494, with the main direction being buy, predicting a decline of at least 4.7 percent in the S&P 500 over the next 40 days.
For the Nasdaq 100 ETF QQQ, overall market sentiment was slightly higher, with more balanced open interest in call and put options. The largest increase in volume was the call option expiring on May 17 with a strike price of 470, but the main direction was not clear.
In the short term, based on the volume of new options contracts, the market is not very bearish on the S&P 500 index, which is expected to fall within 1.6% in the next 12 days; The outlook for the Nasdaq is relatively pessimistic, believing that it will fall more than 6.8% in the next five days.
In the medium and long term (the next month or two), the market is cautious about the S&P 500 and the Nasdaq, expecting the S&P 500 to fall at least 4.7 percent, while there is no clear direction for the Nasdaq.
Details:
SPY option trading sentiment is slightly bearish overall, with the open interest for put options still exceeding that of call options.
The most actively traded new call option is the $SPY 20240419 526.0 CALL$ , with a strike price of 526 expiring on April 19th, which saw 15,800 new contracts added. The most actively traded new put option is the $SPY 20240517 494.0 PUT$ , with a strike of 494 expiring on May 17th, which had 41,000 new contracts.
For the $SPY 20240517 494.0 PUT$ , the majority trade was buying, indicating an expectation that the S&P 500 will decline at least 4.7% over the next 40 days based on SPY's closing price of 518.43. The second most traded was selling, suggesting a decline of less than 1.6% over the next 12 days.
For the $SPY 20240419 526.0 CALL$ , the majority trade was buying, implying an expected gain of 1.4% over the next 12 days.
QQQ option trading sentiment is slightly bullish overall, with open interest for calls and puts in balance.
The most actively traded new QQQ call is the $QQQ 20240517 470.0 CALL$ with a 470 strike expiring May 17th, adding 37,000 new contracts. The most actively traded new QQQ put is the $QQQ 20240412 410.0 PUT$ T with a 410 strike expiring April 12th, adding 47,000 contracts.
For the $QQQ 20240412 410.0 PUT$ , the majority trade was buying, suggesting QQQ is expected to decline at least 6.8% over the next 5 days based on its 440.47 closing price.
For the $QQQ 20240517 470.0 CALL$ , there was no directional bias in the majority trades.
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