March 2008 OEX Open Interest Analysis ~ The Risk Averse Alert

Tuesday, March 11, 2008

March 2008 OEX Open Interest Analysis

OEX 5-min
Approximately 22,000 March OEX Put option contracts were taken out of the money today. Less than 9,500 Call option contracts joined the intrinsic value ranks.

The situation at higher strikes, however, is markedly different.

On the OEX Call side the 615-630 strike prices have just over 16,000 contracts open. On the Put side only 8651 contract are open.

Thus, don't look for the March contract to go out much higher than the S&P 100 reached today.

Follow-through on Wednesday is expected. Overhead resistance, though, might be anticipated in the 625-630 area. Should the S&P 100's advance appear to be stalling at this level on Wednesday, the Risk Averse Alert will be selling its open March 610 Call (OEYCB) position.

Our OEYCB went out today at a 10.60 bid. So, the position has more than doubled in a day. Anticipated follow-through on Wednesday simply will add icing to the cake.

Upon hitting nearby overhead resistance the S&P 100 might just trade sideways going into next Friday's expiration, and then, once the March contract goes off the board, proceed to its ultimate objective.

There is, however, an alternative scenario...

Last Friday's Commentary suggested "RSI [should] rise above high-end readings registered last December," coincident with the S&P 100 rising to the "645-650 range." This remains the ultimate objective of the advance begun today.

Who knows, though? This objective might be reached over the next few days, following which a resumption of the stock market's decline would be expected. More will be known tomorrow.

Truth is follow-through to today's strong advance might, indeed, be rather impressive. The 10-day chart above suggests this possibility is, in fact, quite good.

Irregardless, do not expect the S&P 100 to expire next Friday too far from where it closed today. If we see a strong follow-through to today's advance, we might keep our eyes open for a reversal of fortunes, wherein we could expect a day or two of downside volatility making an OEX Put option play a possibility sometime late this week or early next.

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© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

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