Far-Dated Put Options Accumulating, Institutions Betting on May Sell-Off
Market attention shifted to earnings season, with U.S. stocks extending their rally. Spotify's shares surged 11.4% after beating Wall Street's Q1 expectations and issuing an upbeat Q2 guidance. UPS rose 2.4% as the delivery giant's profits exceeded forecasts.
Options market data showed continued accumulation of far-dated put options on the S&P 500, implying expectations of another 5% decline over the next two months. For QQQ, far-dated puts kept adding, suggesting an 8% drop is priced in over the same period. On small-caps, Russell 2000 options saw further build-up of far-dated put positions, indicating a potential 4.5% decline in May.
Details:
The S&P 500 ETF (SPY) options overall reflected a bullish trading sentiment, with sellers of put options dominating. Open call interest declined -8.2% over the past 5 days. Open put contracts fell -15.2% over the same period.
For call options, investors sold the most new $SPY 20240425 517.0 CALL$ with a 517 strike expiring April 25, adding 24,000 contracts. This suggests expectations for SPY to trade above $517 by week's end, capping this week's upside around 2.3%.
The most bought put option was the $SPY 20240621 477.0 PUT$ with a 477 strike expiring June 21, adding 26,000 contracts. This implies expectations for the S&P 500 ETF to fall 5.1% by June 21.
The Nasdaq 100 ETF (QQQ) options overall showed a bullish trading sentiment, with sellers of put options dominating. Open call interest declined -2.7% over the past 5 days. Open put contracts fell -9.2% over the same period.
For call options, investors bought the most new $QQQ 20240426 441.0 CALL$ with a 441 strike expiring April 26, adding 11,000 contracts, suggesting expectations for QQQ to rally around 3%.
The most traded put option was the $QQQ 20240621 390.0 PUT$ with a 390 strike expiring June 21, adding 14,000 contracts. This points to expectations for an 8% drop in QQQ by early June.
The Russell 2000 ETF (IWM) options overall reflected a bullish trading sentiment, with buyers of put options dominating. Open call interest declined -15.3% over the past 5 days, while open put contracts fell -5.8% over the same period.
For call options, the most traded was the $IWM 20240621 220.0 CALL$ with a 220 strike expiring June 21, adding 18,000 contracts. This implies expectations for IWM to rally 11% by June 21.
For put options, investors heavily bought the $IWM 20240517 189.0 PUT$ with a 189 strike expiring May 17, adding 44,000 contracts. This signals expectations for a 4.5% decline in IWM by mid-May.
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