Bleeding Down The Options

Two Ways To Make ‘Put’s Worthless

The first way is of course, a rally to the upside.

That’s what market traders are expecting based on massive (retail) put option buying; the largest on record.

The other way, not talked about as much, is the boring way.

That is, the slow grind of time.

The massive positioning with puts can be ground down to nothing as well by the market going sideways or down but not down fast enough.

The semiconductor index the SOXX, has already pushed lower in a massive energy thrust (details here and here).

The instabilities from this action need to be worked off.

Prior analysis shows the most likely outcome, if yesterday’s highs are not breached, is a sustained move to the downside.

Let’s take a look at what the SOXX, is saying about itself.

SOXX, Daily Chart

We’re about ninety minutes after the open, with the following chart.

Marking up the chart, is a potential stop location for an open short position SOXS-22-02 (not advice, not a recommendation).

If SOXX penetrates that level to the upside, the market is either reversing higher or heading higher for more testing.

Either way, it’s not (for my firm) the place to be short.

The next chart shows a possible trading channel.

Price action can hug the right side of this channel and decline slowly enough to effectively neutralize the massive put positioning as linked above.

That scenario is not generally discussed. It’s not exciting and it does not get ‘clicks’.


Today’s action will be important. A new daily high will close out the SOXS-22-02, short (not advice, not a recommendation).

A slight new low or and inside day, keeps the trade alive and results in one more day of put options bleed.

Everyone seems to be expecting a crash or a short-squeeze.

What’s not expected, the most frustrating for both sides … is neither.

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

The Danger Point®, trade mark: No. 6,505,279

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