December 18, 2015

S&P 500: Why 2000 must be defended at all costs

What a co-incidence.

Few minutes ago, I posted my views on S&P and indicated 2000 is the support as per lower trendline.

And then, I read this post on Zerohedge as to why 2000 must be defended at all costs!

Explaining Today's "Massive Stop Loss" Quad-Witching Market Waterfall: Why 2000 Must Be Defended At All Costs


Levels to watch are the large imbalances in favor of puts in Dec SPX put contracts at 2050, 2000, 1950, 1900 strikes. It further writes that "as SPX moves below these levels market makers who are short these puts would be forced to sell spot futures to hedge, which could exacerbate a market selloff."

The "Quad witching" here refers to monthly and quarterly options (US markets) expiring on the same day. You can read more about this here.

My interpretation - S&P 500 is a buy on dips around 2000.

Does this impact Indian markets? Not at all.... but all the same, I noticed something very strange in our options markets.

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