Using Put/Call OI

Using Put/Call OI to Predict the Rest of the Week

Today we check out the put/call open interest to help us determine what may be in store for the rest of the week. The market likes to cause the most pain possible – something that can only be accomplished with a close such that the most number of calls and puts will expire worthless. The one caveat is earnings could, on a very short term basis, mess with things. Nevertheless, this is what is likely to happen absent market-moving news. …

SPY (today’s close 107.46)

Put OI much greater than Call OI.Call OI biggest at 105 & 106 and again at 110 and semi big between the 106 & 110.Put OI biggest between 100 & 106 and again down at 95.So 105, 106 seems to be the breakoff – the area most of the calls and puts will expire worthless. With Tuesday’s close at 107.46, a little weakness is needed to

accomplish this.

DIA (98.93)

Again, Put OI much greater than Call OI.Call OI biggest between 95 & 103.Put OI biggest between 89 & 98.So there’s a 3-point overlap between 95 & 98, but since Put OI is much greater than Call OI, a close near the top of the range would produce the most frustration.

IWM (61.17)

Put OI is massive compared to Call OI.Call OI biggest between 60 & 66.Much bigger Put OI biggest 50 & 62.The overlap is around 60, 61 & 62, but since Put OI is so much bigger, a close at the top of the range would do the most damage.

QQQQ (42.58)

Again, Put OI dominates.Call OI biggest between 39 & 45.Much bigger Put OI biggest between 34 & 43.The Put OI is so much bigger than the Call OI, to cause the most pain, the Q’s need to stay near 43 or above.
In summary, the SPY and DIA need to weaken slightly and while the IWM and QQQQ needs to move up slightly. Both can’t happen, so lackluster trading will have to do.
This isn’t rocket science, and there are certainly no guarantees. This just gives us a frame of reference to work from.