Indexes Top Out, Institutions Sell Upside Calls

A sharp drop in US weekly initial jobless claims dented hopes for Fed rate cuts, offsetting the tech rally led by Nvidia and sending Boeing plunging over 7.5% as Treasury yields climbed.

Options flows showed the S&P 500 topping out, with expectations for SPY to trade below 528 by June 14 expiration. QQQ was seen capped with less than 2% further upside priced in by May 31. For small-caps, the Russell 2000 topped out with IWM expected to stay below 214 by June 7.

Details:

The S&P 500 ETF (SPY) saw open call interest rise 4.3% over the past 5 days. Open put contracts increased 2.2% over the same period.

For call options, investors sold the most $SPY 20240614 528.0 CALL$  with a 528 strike, adding 18,000 contracts. This implies expectations for SPY to trade below 528 by June 14 expiration.

For put options, the most bought were $SPY 20240719 499.0 PUT$  with a 499 strike, adding 35,000 contracts. This prices in a 5.1% pullback in SPY by July 19 expiration.

The Nasdaq 100 ETF (QQQ) saw open call interest rise 0.7% over the past 5 days. Open put contracts increased 3.6% over the same period.

For call options, investors sold the most $QQQ 20240621 475.0 CALL$  with a 475 strike, adding 24,000 contracts. This caps expectations for further QQQ upside below 4.6% by June 21 expiration.

For put options, investors sold the most $QQQ 20250117 410.0 PUT$  with a 410 strike, adding 94,000 contracts. This limits expectations for a QQQ drawdown below 9.8% by January 17, 2025 expiration.

The Russell 2000 ETF (IWM) saw open call interest rise 2.6% over the past 5 days, while open put contracts increased 1.2% over the same period.

For call options, the most actively traded was the $IWM 20240607 214.0 CALL$  with a 214 strike, adding 23,000 contracts. This suggests expectations for IWM to remain capped below 214 by June 7 expiration.

For put options, there was heavy buying in the $IWM 20240719 193.0 PUT$  with a 193 strike, adding 77,000 contracts. This prices in a 5% decline in IWM by July 19 expiration.