Red was the theme of the previous week, and with the terrorist attacks in France, many expected at least some bearish continuation. We did keep selling off after hours on the indices last Friday. But when we saw SPX Futures up sharply from those lows, sentiment no longer felt bearish at all, let alone crash worthy. As the day passed, the possibility of a strong turnaround became a certainty, with hope originating from some bullish AM sweeper action.
These options, which were worth a cumulative value of over $4.6 million in premium, exploded in price, as can be seen from the chart below.
At the close, these option that were purchased at $3.09 saw a B/A of $3.99/$4.05.
As the day passed, further bullish index bets were made:
When things look the worst, the move down is likely already over, and that was clear today with today’s squeeze of last week’s bears. Always allow yourself to clearly read what the flow is telling you, and never fight sentiment.
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