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Posted by Tango
on February 8, 2019, 11:45 am
On the outright options, we see the large number of put exercises if the market stays below 105.00. Below 102.50 the put exercises will/would be even greater. The general rule that we follow is that approximately 90% of the time, the market will go lower the day following expiration if the exercise composition favors puts. If the market is steady and a majority of option exercises are calls, then the market usually goes up on the following day. There is no know reason for this behavior. Possibly, it is because buying against puts disappear after expiration.
With regards to spreads, we see the potential exercises of March spreads below -3.00 in MarMay and -5.50 in MarJul. On Monday, we should see continued rolling by fund shorts with possess resistance by option position holders.