To The Moon

Fading rate cut hopes and geopolitical uncertainties fueled a sell-off in large tech stocks, leading to a Black Friday for US stocks. The S&P 500 broke below the 4,000 level. The Nasdaq saw its sixth consecutive day of declines, the longest losing streak in over a year. American Express lifted the Dow Jones to close higher.

Options market data showed expectations for a narrowing decline in the S&P 500, with a drop of less than 4.4% expected by May 17th. For QQQ, the expected decline narrowed, with a 2.1% drop projected by May 17th. For small-caps, Russell 2000 options implied a tightening range, with a 1.5% decline and 6.7% upside cap expected for May.

Details:

The $SPDR S&P 500 ETF Trust(SPY)$ options overall showed a slightly bullish trading sentiment, with sellers of put options dominating. Open call interest declined -7.1% over the past 5 days. Open put contracts fell -18.1% over 5 days.

For call options, investors bought the most new $SPY 20240503 510.0 CALL$ , with a 510 strike expiring May 3, adding 37,000 contracts, suggesting expectations for SPY to trade above $510 by May 3, a 3% two-week rally.

For put options, investors sold the most $SPY 20240517 473.0 PUT$  while buying the $SPY 20240517 471.0 PUT$ , forming a put spread expecting the S&P 500 ETF to decline less than 4.4% by May 17.

The $Invesco QQQ(QQQ)$ options overall showed a bearish trading sentiment, with buyers of put options dominating. Open call interest declined -0.3% over the past 5 days. Open put contracts fell -10.3% over 5 days.

For call options, investors bought the most new $QQQ 20240426 430.0 CALL$ , with a 430 strike expiring April 26, adding 32,000 contracts, suggesting expectations for QQQ to rally about 3.8% this week.

For put options, investors sold the most new $QQQ 20240426 400.0 PUT$ , with a 400 strike expiring April 26, adding 55,000 contracts, implying expectations for QQQ to fall 3.3% this week. The $QQQ 20240517 405.0 PUT$  expiring May 17 added 32,000 contracts, suggesting QQQ is expected to drop 2.1% by mid-May.

The Russell 2000 ETF (IWM) options overall showed bullish trading sentiment, with buyers of put options dominating. Open call interest declined -15.2% over the past 5 days, while open put contracts fell -6.5% over the same period.

For call options, investors sold the most IWM 20240503 216.0 CALLs combined with $IWM 20240503 206.0 CALL$ , forming a call spread capping potential upside at 6.7% by May 3.

For put options, investors heavily sold the $IWM 20240517 180.0 PUT$  with a 180 strike expiring May 17, adding 51,000 contracts. Combined with $IWM 20240517 190.0 PUT$ , this put spread suggests expectations for IWM to drop 1.5% by mid-May.