Weekly Thoughts

Monday brings with it the start of the November option cycle and thus I thought I’d share some of the levels I’ll be watching. Below is a chart of last week’s price action (always a great place to start when assessing current value) which shows the $SPY closing above the weekly volume weighted average price (VWAP) and the weekly volume point of control (VPOC). The overall trend was up with the midpoint at 117.81 which proved to be resistance going into the close. The +-2 standard deviation channel was 2.52 points wide which is typical of an option expiration week.

Looking at the weekly price targets (A=above pivot; B=below pivot), A3 comes in just under 120 while the pivot is within .10 of last week’s VPOC at 117.50.

The November cycle is a five-week cycle and contains an earnings season so it’s an important one. Here are the pivot points for the November cycle:

Pivot=116.14; R1=120.11; R2=122.51; S1=113.71; S2=109.77

I’ve already entered a 30% position on the call side and 10% on the put side so I’m looking to leg into more put spreads this week. If the seasonal statistics hold true I shouldn’t have an issue selling those put spreads early on this week. I participate in each cycle, but never more than 40% of my total portfolio is exposed in any one cycle. Should be a good week with earnings kicking it up a notch so be prepared and trade proactively!