This is a play that typically happens once every quarter of the year. Every third friday.
For reference, here is the previous thread I posted in regards to this play: [ Link to Thread ]
The rundown is essentially that a massive amount of Open Interest disappears from the market. Between options within indices and futures. This so far since the previous two times this has been called out and played has led to a bearish downtrend leading into expiration.
I’m looking to enter next week with Puts. Either on Thursday or Friday. The ‘high’ I’m expecting is a range in the 440s. That said, I am thinking SPY will try to get that high before then. If I do see anything in the mid-440s before my planned entry, I may enter early with a single position 1-2 months out to avoid incurring heavy theta.
This is a bear position on an ETF that’s meant to have growth. Although we are in some troubling times this early into the year, especially with Fed Hikes, it’s always possible SPY could try to rally all due to any news from the Fed saying things aren’t as bad as everyone’s led to believe. Even though I am confident this will pan out as I am predicting, I’m also not going to dump my entire account on it. Any more information or even criticism is welcomed.
@The_Ni and I actually posted some data here SPY - Broad Market Analysis - #21 by The_Ni
which suggests an upward move on SPY due to the significantly large amount of put OI that will be removed approaching/after opex…
Read into a tiny bit. Fills into something similar seen in December when Powell spoke. Was bullish news at that time which led me to open my position that previous Witching. I do not doubt a rally happening in two weeks, but I’m still very skeptical on its direction before we see that big bounce.
Is there a site or chart that can provide an idea of the previous Call vs Put OI from December and September? It seems like it’d be likely helpful to figure out if this can show a strong correlation to these Quarterlies especially in the future in predicting based on Call/Put OI or if it’s overall OI.
Currently holding a call on SPY. I don’t think there will be anything below 415 just yet, but I can be very wrong given the circumstances. Going to sell if we make it back to 420s at open. I am still looking to get into a Put position Thursday/Friday, though I might withhold from doing so if I don’t see an entry I’m comfortable with.
Most comfortable for me would probably be around high 430s.
Ended up selling my calls at open this morning. The movement today gives me the impression that there will be continued bullish movement on SPY into Wednesday leading to FOMC. Whatever FOMC brings, I’m likely to enter puts.
If it’s bullish in the first 10 minutes, I’m going to wait either EOD or until it cools down. On the other hand, bearish movement will lead me to opening a small position in case there’s a gap up the following day.
Decided to take a 431 put for next week as the morning runup lost momentum.
Holding this either until it goes red throughout the day or JPow decides to make SPY rocket during the meeting. If neither happen, I’ll likely hold this into Friday.
Sold my 431 for a profit. Will be watching for another entry EOD if I see a runup.
Decided to pick up another put at the 432 level. If it decides to gap up Thursday, I’ll continue to hold until the end of Friday.
Bought an ITM Put at this level for the 23rd. Able to average one more time.
So… SPY ended up nearly touching 440, close to my predicted target. There’s still a hour left in the day and I’m still currently holding puts. I can’t average down anymore, so I’ll just be watching this ride into Friday. If I’m deep green by then, I’ll likely trim my position and hold one put expecting a gap down Monday. It appears unlike the previous FOMC in December, the Market was able to keep its rally into the next day.
There’s still a chance it’ll actually touch 440 today, but I still have a bearish outlook.
After Hours thoughts:
It appears that it ended up hitting my predicted target intraday (440). Meanwhile news of war has seen that runup lose $2 during the after hours since making this post. To mention my current position, I’m down $1,000 on my overall positions from end of day.
Maintaining my prediction for tomorrow. Just for future reference, I don’t think SPY overextended whatsoever today. What I called ended up being right, but I didn’t follow my own advice. Today was a continuation of yesterday’s rally which only goes to show there is a LOT of money just hanging on the sidelines for Covid/War/Inflation related news to settle.
Sad to say, but this did not work out as I expected it to. I can only assume setniment in the Market ended up being too high after FOMC to make sell volume meaningful.
That or the theory that the Put/Call Open Interest really does impact the direction during Quad Witching. Only another uncertainty that I’ll need to overcome when next quarter hits.
One of the biggest things I did learn from this is holding true to my planned entry and not getting in prior. I could have taken a lesser loss than I had if I didn’t jump the gun.
I really enjoyed this DD Tiddly. You did a great job. SPY being fucking rabid right now.
Second that, this was a great DD and really appreciated all of the updates throughout and help.