Options Flow Report

By Chris Capre

Option Analysis Review

• SPY gained about 10pts last week following ORCL’s stellar earnings & an inline CPI
• Most of the rally is from Weds/Thurs gains
• This week we have the FOMC and the Sep op-ex with both likely kicking things around
• Thus vol and direction should express itself health post FOMC/Sep op-ex
  

Major Market Indices & Option Flows

S&P 500 ETF ($SPY)

Weekly Recap & Abstract:

SPY gained last week about 10pts with ORCL’s blowout earnings and the inline CPI bringing the vol lever down. Mon/Tue and Fri were non-movers although 0 DTE action was strong throughout the week. 

This week, we start on a similar note to last week as we expect 0 DTE to have control with no major events on board. Thus, we lean towards less directionality today (unless TSLA takes over the bullish theme). But we think that game ends tomorrow or Weds as traders start to a) adjust positions ahead of the FOMC and b) we have the VIX op-ex which tends to bring vol to the table with the massive VIX adjustments on Tues (last day of trading for VIX op-ex). 

Positionally, we’re in a ‘risk on’ environment while > of 650 even though the BBP is at 655. Between 650-655 is a neutral zone so we hold a bullish hue above 650. But below 650, we’re risk off and things could get slippery. We believe in holding insurance starting tomorrow heading into the FOMC. 660-662 should act as a major resistance zone heading into the Weds FOMC. 

For this week, we start with a catalyst as TSLA is up 8% in pre-market action as it was disclosed that Elon bought over ~$1B in shares on Fri last week. We think this is the reason for the ramp and heavy share trading activity. We lean towards a continued buying spree from the options to start the day as both retail and institutional pump the stock higher. To this end, we could see a move up to 450 which would be back to ATH’s. But then we lean toward stalling as a) the options will be expensive, b) traders will pump the breaks ahead of the FOMC. Also, if never bought, how much of the current gains would be lost? At some point, he’ll stop buying. We think TSLA stays strong for Sep but then struggles in Q4. 

Lastly, we have the FOMC on Weds which will be critical for forward guidance on rates, likely for the rest of the year. We think this starts the directional push for the week. But…we have the Sep op-ex which is absolutely massive, one of the largest op-ex’s I’ve seen in years (top 3 for sure). There are so many positions coming off the board that the shifting sands effect will be huge due to massive dealer hedging adjustments. Thus, we think the market remains vol post FOMC throughout the week, perhaps even into early next week. Some tickers are vulnerable to pullbacks due to them being very call heavy, so caution holding through the end of the week. TSLA, MU, GOOGL, GLD all look a bit rich while XLF, IBIT and UNH look cheap in terms of skew.

Until then, here are some option flow points to consider:

• The TGS is stationed at 640 due to Oct op-ex positioning
• The TCS is sitting at the first resistance level of 660
• The TPS is also parked at the 640 TGS so a combo level (projection if FOMC is bearish)
• Our BBP is really a zone between 650-655 so < 650, we’re ‘risk off’
  
  

Our Trading Plan

• If you believe markets will continue higher this week, we suggest waiting for a mild dip into 655 targeting 660/662 for the week
• If you believe markets will weaken this week, we suggest establishing bearish positions on a move into 660/662 targeting 655/650 for the week
• Tactically we remain bearish < 650 on a daily closing basis
• Expect choppiness to open, but things to get spicier Tues onward
  
  

Nasdaq ETF ($QQQ)

What's Happening

• Tech performed inline with SPY on the week
• TSLA has been ramping up 22% in the last 3 sessions
• Has recaptured 175 but needs to keep gains to further inspire more upside
• Careful holding call heavy stocks to end the week and look towards rate sensitive tickers for the FOMC
  
  

Our Trading Plan

• If you remain bullish on tech for the week, we like waiting for dips into 585 targeting 590/595 for the week
• If you remain bearish on tech this week, we like getting bearish on corrective/weak pullbacks into 590 targeting 585/580 for the week
• We think TSLA will trade a lot of options today, but cautious on trading single legs as they will be expensive
• ORCL is still trying to find its footing post earnings hangover
  
  

Earnings Highlights & Option Flow Interest

Abstract:
Fedex is the only juice on the week. 

Source: Benzinga

Current Option Market Positioning for the Week Ahead

SPY Option Positioning & Open Interest:

Total Calls: 5.6M (+.1M)

Total Puts: 14.4M (+1.6M)

Translation: Bearish < 650

Largest Gamma Expiry: Sep op-ex 19%!!!

QQQ Option Positioning & Open Interest:

Total Calls: 3.6M (+.1M)

Total Puts: 6.3M (+.3M)

Translation: Bearish < 585

Largest Gamma Expiry: Sep op-ex 20%



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