As options traders, there are certain expiration dates we want to be mindful of. Bigger than them all are quarterly expirations.
The next quarterly expiration series is on Thursday, June 30th. We’re seeing similarities between the current market and the structure in March 2022 (the previous quarterly expiration).
The overall structure of the market remains bearish. We don’t see that changing anytime soon.
What we’re discussing here is “short-term thinking”.
Looking at the chart of the SPY futures below, you’ll notice a similar pattern to what we saw back in March:
- Consecutive closes above the daily 21 exponential moving average (EMA)
- Positive shift of the histogram
- Big 3 Bars going red to the yellow
This doesn’t mean the market is suddenly bullish. Nor does it mean the market doesn’t roll over from here. This potentially suggests the market is positioned to crush shorts into quarterly expiration, just like it did in March. If this is the outcome, we’ll have a 2- to 3-week window to take advantage of the “put destruction” by pursuing long positions or credit spreads on SPX.
If we see a close back under the daily 21 EMA, the chances of any short squeeze from here are slim.
Another suggestion: Consider opening a few deep out-of-the-money (OTM) iron condors. This week, we sold an iron condor on SPX for the quarterly expiration. We sold calls and puts 9% above/below the current price. These iron condors make for great “income-producing” trades while we wait for clarity regarding the next directional move.
Stay Focused!