Why Wall Street Should Be Watching SPY 206

The SPDR S&P 500 ETF (SPY) is nearing $206, which could prove a critical level going forward

Dec 24, 2015 at 11:10 AM
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For the second day in a row, the SPDR S&P 500 ETF Trust (SPY) continues to churn just below the $206 level. Specifically, the exchange-traded fund (ETF) was last seen off 0.2% at $205.72, after earlier topping out at $206.08.

Going forward, this will be a key area to watch. As you can see in the chart below, which summarizes open interest levels on the January 2016 series of options, the 206 strike is the nearest strike in which call open interest outweighs put open interest. By the numbers, about 80,000 calls are in residence, versus 40,000 puts.

151224spy

As we've mentioned in the past, call-heavy strikes can often act as magnets for the SPY, which seems to work in bulls' favor. However, they can also act as ceilings, as the hedges related to these long positions sell shares heading into expiration to remain neutral.

Compounding the critical nature of SPY 206 are a number of technical levels. For starters, year-to-date breakeven rests at $205.59, just below the ETF's current perch. For another, as the chart below demonstrates, several significant trendlines are now in the $205.50-$206.50 range. In other words, a decisive move above or below this area could help dictate the SPDR S&P 500 ETF Trust's (SPY) direction moving forward.

151224spy2

 

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