EarningsBeats.com Digest for March 20, 2020
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Options Likely Providing Short-Term Opportunity Only
The QQQ (ETF that tracks the NASDAQ 100) closed yesterday slightly higher than where it had closed on Thursday, March 12th. There's been a tremendous amount of volatility, but in the end, the NASDAQ 100 essentially ended one week unchanged. Hey, it's a start! The good news is that it's been holding steady, though the ride has been one envied at DisneyWorld. The bad news? Well, the obvious bad news is that the virus that has had a
big hand in sending our financial markets in a tailspin is still here. The second piece of bad news, however, is that options expire today and much of the market's buying these past few days could be related to "max pain", which is the point at which in-the-money call premium equals in-the-money put premium. Right now, there's way more of the latter, which behooves market makers to try to push price higher temporarily. Here's one chart as an example:
MSFT's max pain point was approximately 167 as of our Tuesday webinar (so as of Monday's close). Today, MSFT's max pain has slipped to just under 165. I never look at these max pain points to say, "MSFT will gain 20 more points to end at max pain". But I do look at max pain as a directional clue. So I've gone into the week believing that max pain could
influence MSFT's price higher, along with many ETFs and individual stocks. We're looking to open up today with one of our strongest opens over the entire last month....and it's options expiration day.
Coincidence? Hmmmmmm........
Happy trading!
Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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