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A key observation on options market trading was that it reflected equity index activity, but examining the market by flow type reveals some variations in bullishness and bearishness. 

Bearish Sentiment in October 2023 - Executed on 11 September, with the S&P/ASX 200 around 7185, a trader purchased 1200 of the Dec 7100 Puts for 143.00 and sold the same number of Dec 6900 Puts for 89.50. The net result was a cost of 53.50 points – markets have since retreated to 6,800 points with the position now worth 143 points (close to the maximum profit for the trade).

Data source: Bloomberg


Neutral sentiment in September 2023 – Executed on 17 August was a condor, with the index at 7146, a trader sold the 19 Oct 6850 Put for 70 and 19 Oct 7600 Call at 13. The iron condor was completed as the 19 Oct 6650 Put was purchased for 40 and 7700 Call at 9. The net result was a credit of 34 points. The index at expiry opened at 6983 leaving the trader with a maximum profit of 34 points.



When support is broken, the level becomes resistance and the trade that caught our eye is based on the ASX/S&P 200 remaining below 7300. With the index at 7197 a trader sold the 18 May 7300 Call for 28.00 and purchased the 18 May 7500 Call for 4.00 resulting in a credit of 24.00 points and the payoff at expiration that is shown below.

Data source: Bloomberg


Trending markets in August 2023 – Trades were recorded between 3 April and 30 June with the S&P/ASX 200 range bound between 7100 and 7400. One of the potential functions performed by options is the ability to profit from a neutral market environment.

The chart below is the daily price action for the S&P/ASX 200, with the dates when trades of interest were executed. Highlighting when markets were neutral iron condors were placed, when charts trended bullish – bear call spreads were implemented, and finally when charts turned lower bull put spreads were placed. 


Data source: Bloomberg


While many investors may not have the skills or appetite to implement these trades – having a view as to what options investors are putting their hard earned dollars towards can help give signals as to what may happen in equity markets moving forward.

Our series of investment insights blogs will start up again with Dr Russell Rhoads in early 2024.

For more information, contact

Email: equity.derivatives@asx.com.au




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