Last week here I discussed the likelihood of new highs, but that price was unlikely to close above SPY 260 for both open interest reasons as well as psychological round number reasons. A new high was made, but as price approached the 260 level SPY pulled back. For the first time in several weeks SPY did not close at an all time weekly high. Next week is monthly OPEX and as a reminder the open interest for Friday is less likely to shift throughout the week as many of the calls and puts were bought/sold over a long period of time. For the most part the open interest suggests a rangebound week.
SPY-W: (47 of 61 pins since inception of Wednesday expiration).* Wednesday’s expiration is pretty cut an dry. The range is 257 to 261. Any more to 257 or under early in the week is a buy and any move to 261 or over is a sell.
SPY-F: (38 of 55 pins since I began tracking Friday’s).* Remember this is a monthly so calls and puts have been accumulating for a while and are less likely to shift from day to day. There is no great pin as there are high calls and puts on several strikes clustered together. The most I think we can take away from this is that anything under 257 and price can drop through those puts to 255 or 253 quickly due to delta hedging, but likely wouldn’t go any lower than that. To the upside price needs to strongly push through 258 and then we could see a swift strong move (again through delta hedging) through the calls all the way to 260. If price got over 260 there really isn’t much in the way of call resistance to hold it back (after Wednesday expiation). And, of course, we could just see a rangebound week in which price ends near where it closed on Friday rewarding put and call sellers.
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Wednesday 11/8: Successful pin. Wasn’t perfect, but close enough for me to call it a pin (remember it’s an art not a science).
Friday 11/10: Successful pin.