This series of Trading Tips is brought to you by the Market Gear for Mac trading platform.
GameStop (GME) has been one of the most talked about stocks of the year thanks to a much publicized Reddit community drive to push it to unprecedented highs.
To really trade GME options successfully however we strongly recommend using stock trading software to analyze the market.
Market Gear is particularly good for analyzing options and can give you some unique datasets to comment on options in ways that you don’t typically see.
For example, you can look at the Open Interest of a stock’s options leading up to an expiration and compare it to a stock’s options after expiration.
As an example, there is some interesting information to be found in the GME options around the triple expiration coming up on March 19, 2021.
When we look at all options that are set to expire on that Friday, with about a week left, we are currently seeing that about 75% of the Open Interest is in puts and only about 25% in calls.
However, when we look at only options contracts that will exist after the expiration, the percentage of Open Interest in the puts jumps to almost 83%.
This is actually a fairly significant difference when you realize that the put interest is literally ten percent higher after expiration looking forward.
What this suggests is that the smart players in the markets are more focused on GME coming back down after March 19 than they are in the next week.
It’s useful to examine this data on a variety of stocks as it helps build a broader picture of what the smart players in the markets are looking for.
Significant jumps in Put to Call Open Interest around an expiration can be very insightful in understanding what is to come.
You can analyze and even trade GameStop (GME) Options using Market Gear on your Mac.
Check out our full review of Market Gear for more.
This post was contributed by Chris Mercer, COO of iVest+, a company which builds modern technology trading platforms. You can view their Market Gear product here.