To The Moon

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, with fresh call open interest dwindling, implying expectations of another 5% decline over the next two months. For QQQ, far-dated puts kept adding, suggesting a move of over 3.7% is priced in by May 17th. On small-caps, Russell 2000 options saw further build-up of far-dated put positions, indicating a potential 4.5% drop by early June.

Details:

The $SPDR S&P 500 ETF Trust(SPY)$ options overall reflected a bullish trading sentiment, with sellers of put options dominating. Open call interest declined -9.1% over the past 5 days. Open put contracts fell -14.2% over the same period.

For call options, investors bought the most new $SPY 20240503 525.0 CALL$  with a 525 strike expiring May 3, adding 8,992 contracts. This suggests expectations for a 3.9% rally in SPY by early May.

The most bought put option was the $SPY 20240621 480.0 PUT$  with a 480 strike expiring June 21, adding 36,000 contracts. Combined with the $SPY 20240621 460.0 PUT$ , this put spread implies expectations for the S&P 500 ETF to fall 4.9% by June 21.

The $Invesco QQQ(QQQ)$ options overall showed a bullish trading sentiment, with sellers of put options dominating. Open call interest declined -5.7% over the past 5 days. Open put contracts fell -6.8% over the same period.

For call options, investors bought the most new $QQQ 20240517 425.0 CALL$  with a 425 strike expiring May 17, adding 16,000 contracts. Combined with the QQQ 20240517 425.0 PUTs, this straddle initiation signals expectations for a move over 3.7% in QQQ by mid-May.

The most traded put option was the $QQQ 20240503 400.0 PUT$  with a 400 strike expiring May 3, adding 17,000 contracts. This suggests expectations for a 6% drop in QQQ by early May.

The $iShares Russell 2000 ETF(IWM)$ options overall reflected a 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 -5.6% over the same period.

For call options, investors bought the most $IWM 20240510 221.0 CALL$  with a 221 strike expiring May 10, adding 17,000 contracts. Combined with the $IWM 20240510 213.0 CALL$ , this call spread caps potential upside below 8% by mid-May.

For put options, investors heavily bought the $IWM 20240621 188.0 PUT$  with a 188 strike expiring June 21, adding 7,155 contracts. This implies expectations for a 4.5% drop in IWM by June 21.