Economic Slowdown Prompts Valuation Resets, Markets Hedge Pullback

Concerns over the health of the US economy intensified. Meanwhile, investors closely monitored key economic data releases this week for clues on the extent of an economic growth slowdown.

Options flows showed expectations for SPY to see limited downside below 2% by late June. QQQ was expected to trade below 455 by June 21 expiry. Small-caps remained volatile with expectations for a 4.4% swing in either direction for the Russell 2000 through July.

Details:

The S&P 500 ETF (SPY) saw open call interest rise 2.4% over the past 5 days. Open put contracts increased 1.7% over the same period.

For call options, investors bought the most $SPY 20240621 532.0 CALL$  with a 532 strike, adding 15,000 contracts. This implied around 1% further upside priced in for SPY by June 21 expiration.

For put options, the most bought were $SPY 20240719 502.0 PUT$  with a 502 strike, adding 37,000 contracts. This priced in around 4.7% downside for SPY by July 19 expiration.

The Nasdaq 100 ETF (QQQ) saw open call interest rise 1.0% over the past 5 days. Open put contracts increased 2.6% over the same period.

For call options, the most actively traded was the $QQQ 20240604 456.0 CALL$  with a 456 strike, adding 6,986 contracts.

For put options, the most actively traded was the $QQQ 20240621 455.0 PUT$  with a 455 strike, adding 15,000 contracts. This implied expectations for QQQ to trade below 455 by June 21 expiration.

The Russell 2000 ETF (IWM) saw open call interest rise 2.2% over the past 5 days, while open put contracts increased 0.9% over the same period.

For call options, investors sold the most $IWM 20240605 207.0 CALL$  with a 207 strike, adding 10,000 contracts. This capped expectations for further IWM upside below 2% by June 5 expiration.

For put options, there was heavy buying in the $IWM 20240719 195.0 PUT$  with a 195 strike, adding 12,000 contracts. This priced in a 4.4% decline for IWM by July 19 expiration.