OptionPundit

Author: jychiu

  • Expiration Pinning – Apr 07

    Today is again the last trading day for Apr 07 option month.

    Below is my prediction for the pinning of the following stock / index :

    1) GOOG at $490.  If not, $480.

    2) GS at $220.  If not, $210/230.

    3) OIH at $150.  If not, $145/$155 (typo error earlier of $155)

    4) AAPL at $90.  If not, $95/$85.

    Let see how it goes at the close.

     

  • Lunch Time Move

    I used to have the ideas that the lunch time will have small and quiet price movement. But this Tuesday and Wednesday, the move started at lunch hour (12:00) with significant volume as well. So you might want to take note of recent market behavior.

    Today is the expiration day, expiration pinning is going to be in action. By looking back at past 1-2 month movement, look like if there is a move, it is starting from lunch hour as well. So if you are looking at which direction and what whole number (it could be the non-existence of 3/4 whole number as well) to focus on, look at the price movement from 12:00 onward.

    I will be looking GOOG, AAPL, OIH, GS and SHLD.

    Just to share.

  • GOOG Trading Opportunity

    Kelvin’s blog has pointed out that GOOG has a 6 monthly seasonal cycle.  Now it is the 6 months low, I have plotted 4 year weekly chart, it just touched the low this week.  On the daily chart, candlestick of Morningstar signal cut up 2 days ago, now is cutting up 20SMA, confirmed by stochastic and RSI, also soon DI+ cut up DI-as well. You know GOOG is expensive, what is the strategy ?   

    goog_4_year_chart.jpg 

    [Further update on 11 Mar]: From the price move on 8 & Mar 2007, GOOG is not strong, therefore I feel Bull Call Debit Spread of Apr $480/$490 Call at about $3.1 debit might not be a good choice. The following can be considered based on GOOG closed at $453 on 9 Mar :
    1) Bull Put Credit Spread of Apr $430/$420 Put at $2.2 credit or better
    2) Bull Put Credit Spread of Jun09 $520/$510 Put at $6.30 credit or better. 

    Any one has any comment or other strategy ? 

  • Good Chance for the Market Close on High on Expiration Week

    From OP Contributor – Jiayu Chiu

    I have noted that expiration week is the most bullish week in a month. For the past 2 years, there is high percentage of SPX close on high in the expiration week in a month. Let see this month of statistics on how the SPX close :

    Feb 2007 : 2.4 points from high of the month.

    Let look the statistics for the past 16 months :

    From Nov 2005 to Feb 2007 (16 months), there is more than 75% chance that the SPX closes on high on the option expiration date. 10 months closed less than 5 points from the high of the month, 2 months closed between 6-9 points from the high.

    The study starts from the first day of the expiration month, for example in the month of Dec 2006, that was 20 Nov 2006, till the last day of the Dec 2006 trading day, that was 15 Dec 2006. Separately there are 10 months from Nov 2005 to Oct 2006, that the index closed less than 10 points from the high of the month. Just to list the month in details (closing SPX price from the high of the option month):

    1. Nov 2005 : 1.3 point
    2. Dec 2005 : 8.5 points
    3. Feb 2006 : 2.2 points
    4. Mar 2006 : 3.2 points
    5. Apr 2006 : 6.9 points
    6. Aug 2006 : 0 point
    7. Sep 2006 : 5.0 points
    8. Oct 2006 : 4.2 points
    9. Nov 2006 : 2.6 points
    10. Dec 2006 : 4.6 points
    11. Jan 2007 : 4.8 points
    12. Feb 2007 : 2.4 points

    What are the suitable strategies for this observation ? One of them might be to buy a 2 month ATM VIX Put one week on the first monday morning. We all know that VIX generally goes down when the broader market goes up in price. With 2 months ATM VIX Put we do not lose much in time decay. Let take for example this Feb 2007 month, VIX was 11.10 on 9 Feb 2007, the Apr 11 Put was doing around $0.4, the VIX was 10.05 on 16 Feb 2007, the Apr 11 Put closed at around $0.55.