Price Headley's Big Trend Watch
Enviado: 12/2/2003 18:44While the February options expiration isn't until next Friday, February 21, we're see
significant activity in the QQQ options that will prove critical in whether the
market stays in this trading range or finally breaks down. We like to look at the
open interest in the Nasdaq 100 Trust (QQQ - 24.15) for any major levels that are
attracting a heavy amount of options activity. Last month the QQQ open interest
theory expected the QQQs to stay stuck between 26 and 27, and the Q's actually
finished at 25.31, which would have been a scratch for options sellers betting on
this 26-27 range holding up (you'd win some from the 27 calls going out worthless
while losing some from the 26 puts finishing slightly in-the-money).
Looking at the February open interest patterns below, you see the biggest put and
call open interest in the cubes at the 25 strike, with secondary key calls overhead
at 26 and key put open interest just below at 24. This explains why the market has
seemed bracketed between the 24 and 26 strikes, and it suggests this is likely to
continue. Remember the caveat here: if the QQQ closes more than ½ point outside of
this range (i.e., under 23.50 or above 26.50), then a breakout can be considered to
occur. We have been more bearish than bullish of late, but we are considering
locking in some bearish profits on this key retest of the 24 area over the next
couple of sessions, and then re-shorting should we break under 23.50 on a closing
basis. This indicator has saved me numerous times from getting stuck with the rest
of the crowd, and with open interest updates posted daily each morning (free at
www.cboe.com), we will be watching the changes in the number of open options
contracts at these key strike prices very closely.
QQQ OPTION OPEN INTEREST
significant activity in the QQQ options that will prove critical in whether the
market stays in this trading range or finally breaks down. We like to look at the
open interest in the Nasdaq 100 Trust (QQQ - 24.15) for any major levels that are
attracting a heavy amount of options activity. Last month the QQQ open interest
theory expected the QQQs to stay stuck between 26 and 27, and the Q's actually
finished at 25.31, which would have been a scratch for options sellers betting on
this 26-27 range holding up (you'd win some from the 27 calls going out worthless
while losing some from the 26 puts finishing slightly in-the-money).
Looking at the February open interest patterns below, you see the biggest put and
call open interest in the cubes at the 25 strike, with secondary key calls overhead
at 26 and key put open interest just below at 24. This explains why the market has
seemed bracketed between the 24 and 26 strikes, and it suggests this is likely to
continue. Remember the caveat here: if the QQQ closes more than ½ point outside of
this range (i.e., under 23.50 or above 26.50), then a breakout can be considered to
occur. We have been more bearish than bullish of late, but we are considering
locking in some bearish profits on this key retest of the 24 area over the next
couple of sessions, and then re-shorting should we break under 23.50 on a closing
basis. This indicator has saved me numerous times from getting stuck with the rest
of the crowd, and with open interest updates posted daily each morning (free at
www.cboe.com), we will be watching the changes in the number of open options
contracts at these key strike prices very closely.
QQQ OPTION OPEN INTEREST