Today’s sharp 2.2% SPX decline wasn’t a surprise for those who looked closely at the options metrics after Friday’s spot price fakeout. Ahead of the long weekend, market participants priced in the downside with both short- and long-term options.
AFTER FRIDAY CLOSE: 1st image
Put options were nearly twice as expensive as calls at equivalent Expected Move distances before Tuesday's open. The price have a fake-out at friday.
AT TODAY CLOSE: 2nd image
While today’s drop has led to some call skew on weekly options, suggesting a short-term rebound, the long-term bearish sentiment remains intact. Key unemployment data this week will be crucial for the market’s next move.
Conclusion: Always check the option pricing skew before any moves
https://www.reddit.com/gallery/1f8djxj
Posted by TanukiTrade
4 Comments
Fascinating. What’s the “expected move”? Is it the 50d straddle price?
its strange because put options were really cheap on SPY compared to calls this morning.
It doesn’t mean anything if you didn’t actually do anything with the trade or whatever, and you clearly didn’t do anything because you’d either be bragging about windfall profits or completely quiet and on your way to wherever it is you’re gonna go when you capture 100% of a +2% move with 100% certainty that it was going to happen…
So whats it pricing in for tmr