February 18, 2022 Welcome to Options Hell

9:07 am

$2.2 Trillion In Options Expire Today: Here Are The Stocks That Will Move The Most

ZeroHedge remarks, “t’s not the biggest option-expiration Friday, but it is big with $2.2 trillion in index and single-stock options, split between $820TN in early settlement and $1.3TN in afternoon settlement.

Heading into today’s opex, there has been an unprecedented surge in purchases of downside protection, with Goldman calculating that put volumes as a proportion of total single stock options notional is up to the highest level since April 2020.”


6:45 am

Good Morning!

I will be clearing snow for a couple of neighbors this morning and leaving on a road trip this afternoon.  Thus, the early commentary.  I hope I have it right.

SPX futures rose to an overnight high at 4416.60, then drifted down to 4400.00, where short gamma begins today.  Options expiration is loaded with puts all the way to 4475.00 (Max Pain), making it imperative that the dealers hold the line here.  However, should one or more blink, the downward slope becomes very slippery.

The NYSE Hi-Lo Index closed at -135.00, offering no support for the bulls.

ZeroHedge reports, “U.S. stock index futures staged a modest bounce on Friday, recovering a portion of losses from Thursday’s rout after late news of a planned meeting between U.S. and Russian officials “late next week” spurred hopes of a diplomatic solution to the Ukraine standoff, signaling an upbeat end to a week in which investors shunned risky assets on geopolitical and tightening monetary policy concerns. Nasdaq 100 futures were up 0.7%, while S&P 500 futures rose 0.5% by 7:15 a.m. in New York with traders bracing for a potentially volatile session due to option expirations. Both indexes are headed for a second straight week of declines with investors nervous about Moscow’s military buildup near Ukraine and prospects of sharp Federal Reserve rate hikes. Treasury yields were unchanged at 1.97%, gold and the dollar were flat and bitcoin traded just above 40,000 after plunging about 10% on Thursday.”


VIX futures challenged the 50-day Moving Average at 26.99, bottoming out at 26.35.  However, it has now recovered to the 50-day  as I write.  Most analysts view 25.00 as the breaking point for the VIX, so the efforts to control it appear to have failed.

Long gamma begins at 25.00 with 15,885 calls contracts and only 885 puts.  Barring an intervention by a very large player, the likelihood is that the VIX may continue its rally.


TNX futures made a new overnight low at 19.46 as it continues to test the Cycle Top support at 18.99.  TNX is only a week away from its Master Cycle completion, suggesting that it may be a low.  If so, a possible target may be  the lip of the Cup with Handle at 17.00.


West Texas Intermediate Crude is testing the Cycle Top support at 89.81.  A close beneath that level confirms a sell signal.  The Broadening Wedge trendline is at 67.00.  Should WTI fall beneath that level, the target may be near 50.00.  This is very close to a 50% retracement of the rally from the April 2020 low.  The next Master Cycle low is anticipated in the week of March 21.


The GSCI Ag Index is in a correction mode after its Master Cycle high on February 10.  The correction may last another week or so with a probable target at the Intermediate-term support at 462.68.  An extension to the 50-day at 456.95 is also probable.  A counter-trend pullback is often 2-3 weeks in duration.  Trending strength may reappear after the end of the month.



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