Option Analysis Setups: $SPY & Tech Weak, But We Have Some Long Trades
The beginning, middle or end of the bear market?
NOTE: We were off last week traveling and presenting in Vegas. You can watch my free presentation on option dealer and market maker hedging flows here.
Weekly Recap:
It was an ugly week for the S&P 500. It was the 7th losing week in a row for SPY’s, one of the worst streaks ever. While $1.9T (trillion) of notional option flows expired on Friday, June flows are suggesting it will be a much bigger op-ex.
Source: Bloomberg
We look to sell rallies and see any rip as a short covering opportunity to sell.
Weekly Recap + Market Abstract:
The S&P 500 started off with a weak corrective lift over the first two days of trading last week, only to be slammed for a ~3% red day on Wednesday. Markets limped forward on Thursday, only to sell-off another -3% before creating an end of the week Vanna rally of 2% while still closing the week down.
As we’ve been saying for weeks now, volatility could and likely will remain high due to the a) negative gamma, b) elevated VIX, and c) lack of liquidity.
Our analytics suggest the last two hours of trading to end the week was traders closing deep ITM puts. This released the short share hedges from dealers, thus allowing the market to rally.