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VIDEOSPY Open Interest and Pin Risk
By
Rob Roy Mar 19, 2009 1:40 pm
Where will equity prices move in the short term?
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Just a little update on open interest in SPY options for tomorrow. As of this morning, the open interest in the SPY options is reflected below. The chart shows the total number of options contracts that will be worthless at expiry at each strike point.
Click to enlarge
This way of visualizing exposure helps to inform us as traders about the potential for “pin risk,” which is simply the tendency of markets to move the price of the underlying security to the strike price that has the most action in it. Pin risk really develops as we get much closer to expiration, and so looking at these charts today and the update tomorrow will be quite informative about where equity prices may move in the short term
The upward sloping line on the chart indicates that there are significantly more put options outstanding than there are call options for March.
The next expiration that we'll look at will be the special March 31 - quarter-end options that are on the board right now.
Position in SPY
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