Major U.S. stock indexes rallied, with Tesla surging 15% and boosting the consumer discretionary sector. Apple rose 2.5% on an analyst upgrade, though investors remained cautious ahead of the Federal Reserve's rate decision and April jobs report.
The Fed will hold its two-day policy meeting on April 30-May 1, with several officials previously signaling no urgency to cut rates. Markets are pricing in a 97.6% chance of the central bank standing pat.
Options market data suggested expectations for reduced near-term volatility in the S&P 500, with a downside bias this week. For QQQ, focus was on bets for an outsized move in either direction, with expectations of a 1%+ decline or 3%+ rally over the next two weeks. Small-cap Russell 2000 options saw continued accumulation of far-dated $IWM 20240621 190.0 PUT$ , implying potential for a 4.5% drop by late June.
Details:
The $SPDR S&P 500 ETF Trust(SPY)$ options overall reflected a bullish trading sentiment, with sellers of call options dominating. Open call interest declined -1.4% over the past 5 days. Open put contracts fell -0.7% over the same period.
For call options, investors' largest opening position was the $SPY 20240430 512.0 CALL$ with a 512 strike expiring May 1, adding 12,000 contracts.
The most sold put option was the $SPY 20240430 499.0 PUT$ with a 499 strike, adding 18,000 contracts. This suggests expectations for a 2.1% decline in the S&P 500 ETF by April 30 expiration.
The $Invesco QQQ(QQQ)$ options overall showed a bullish trading sentiment, with sellers of put options dominating. Open call interest increased 1.3% over the past 5 days. Open put contracts grew 6.4% over the same period.
For call options, investors sold the most new $QQQ 20240510 448.0 CALL$ with a 448 strike, adding 29,000 contracts as part of a butterfly spread with 428 and 438 strikes. This implies expectations for QQQ to either fall over 1% or rally 3%+ by mid-May.
For put options, investors sold the most $QQQ 20240503 394.0 PUT$ with a 394 strike, adding 17,000 contracts. This suggests expectations for a decline of less than 8.7% in QQQ by early May.
The $iShares Russell 2000 ETF(IWM)$ options overall reflected a bearish trading sentiment, with sellers of put options dominating. Open call interest grew 5.9% over the past 5 days, while open put contracts increased 5.0% over the same period.
For call options, investors sold the most $IWM 20240517 190.0 CALL$ with a 190 strike, adding 6,089 contracts. This implies expectations for a 4.5% drop in IWM by May 17.
For put options, investors heavily bought the $IWM 20240621 190.0 PUT$ with a 190 strike, adding 73,000 contracts. This signals expectations for a 4.5% decline in IWM by June 21.
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