After the week was starting out stronger for the Apes as before Thursday ended with a very low trading volume. I expected more.
While AMC was increasing the average
daily trading we noticed today that the volume cut out at around 27%. The
Option trading volume reached about 75% of the Monday and Tuesday volume and
only 60% compared to last Thursday.
There were about 300,000 options
changing hands today, 60% of them were calls and 40% Puts. These numbers do not
mean that those options were bought. They were sold and bought. What ended up
in the OPEN INTERESTS shows you if there are an increase of positioned buyers
and sellers. Thus, even there is a 60% call option trading it could mean they
were excessively sold.
I walked the Sweet Spot of the Market Maker up from 34-36 in the beginning of the week to 35-36. And today it looks like it moved again slightly UP to 35-37. This is where the MM want to be tomorrow when about 112,000 options with a total estimated value of $119,000,000.00 will expire. The payout for the MM would be around 5.5 to 6.5 million Dollars only.
That the closing price ended below the
sweet spot at 33.84 might show in my opinion that The Put buyers were
outnumbering the call buyers. It could also mean that buying calls do not have
the expected effect on the share prices, remember, you are buying a derivative,
a contract and not the shares themselves, and hence the Market Maker is only
forced to buy the shares if he needs to cover. This would influence the price
upwards. But also notice the apes buy their lottery ticket on a weekly base and
hence the options expire on every Friday. The market maker still have the
shares from the week before and hence they just take you contract and sell the
shares instead of buying because they might have a shotload of them already.
And why I am saying it I have the feeling that the price of AMC drops easier
with a 1:1 volume or even less than that. I expected the price dropping this
week below 30.
Thus, buying call option might only have less price influence. And that’s why I strongly believe all 122,000 options will expire worthless inside the sweet spot tomorrow. 35-37. If AMC closes below 35 it would show me the increasing strength of put buyers.
Please also consider, any call option
you buy tomorrow for next week will not have any effects on the price unless it
is a huge volume because 75,000 x 100 shares expire and can easily be covered
at closing with the excess on long positions. That’s why the price might move
into the sweet spot and that’s it.
Also consider that for every call you
buy there MUST be someone who is selling that call to you. That means if you
are totally convinced the price goes up and buy there is another trader with
the total conviction that the price will go down and sells. The MM only
provides the liquidity and let the contracts expire. And they will settle with
the Clearing House.
Call to Put Ratio for this week is
0.564 and for next week so far 0.69. Put buyers buying with a longer time
horizon.
- At $45 we have a weak level of call options. About 5,000 contracts
- At $40 we have the strongest level with about 30,000 contracts
- At $38 another level with about 10,000 contracts.
- At $37 another stronger level of about 13,000 contracts
- At $36 about 5,000 contracts
- The Puts are scattered about a wider field. We find weak support levels at 35-6,500, 34-5700, 33-5700, and 32-5000 contracts.
It will be much easier to break below
30 since after $32 everything is open. Also all combined put levels make about
only 80% of the $40 Call level.
No comments:
Post a Comment