Option Analysis Setups: $SPY Consolidating, Needs Bullish Positions to Build to Continue
Weekly Recap:
● Price consolidated gains from the prior week, staying in a 10 point range
● Traders bought calls on dips and sold calls on rallies
● Implied vol is pretty low, so not much more tailwind
● 420 should remain upside resistance to start the week, perhaps longer
Major Market Indices & Option Flows
1: S&P 500 ETF ($SPY)
Last week markets built up OI between 400 and 420, but we didn’t see any large concentrations build above 420. While OI is thick between 410/420, below 410, we see a less bullish/mildly neutral to bullish positioning. Below 400, we think stops are tripped in a heavy way, VIX/IV ticks up and traders start buying puts, which increases downside vulnerabilities.
The good thing about positioning filling in between 410-420 gives it more support and suppresses volatility while inside this zone.
But it also weakens things below 410 a bit and the market is not prepared for a move below 400.