By: mckinney2227 $$$
Reply To: None Thursday, 4 Jan 2001 at 9:47 PM EST
Post # of 126317
Overhead Call Interest Bearish
Reprinted from Schaeffer Research
(Note- the open Call interese is now greater than at the publication of this article !)
QQQ Open Interest Worrisome For Bulls
12/27/2000 12:08:00 PM
We've been kicking around the possible implications of the current Nasdaq-100 Trust (QQQ –60-7/8) open interest configuration. For the most part, the implications are not bullish for technology investors.
The current open interest configuration for QQQ exemplifies the very definition of overhead call open interest (see the chart below). Particular strikes of note are the January 70 and 75 calls, which are home to open interest of 46,783 and 45,216 contracts, respectively. There are also nearly 70,000 contracts of open interest overhead at the January 65 and 67 strikes. Needless to say, this is some significant overhead call resistance for the Nasdaq to overcome.
(No graph available here)
Chart courtesy of Schaeffer's Daily Sentiment
What are the implications of overhead call open interest during the most recent Nasdaq decline? We have compiled data regarding total call open interest on the QQQ. Total call open interest at the most recent Nasdaq peak on September 1 stood at 173,333 contracts. Total call open interest today, with the Nasdaq 41 percent lower than it was on September 1, is 806,273 contracts. This is a 365-percent increase in total call open interest, despite the terrible price action. Option speculators have actually become more bullish as the Nasdaq crumbles. From our contrarian viewpoint, this data has decidedly bearish implications.
- By Ron Taylor
imo
AI
