Nb. Our comment from the 07/20/20
It is always a difficult transition when we go from one intermediary expiry to another, as the volumes are just not there.
To try and put just a little bit of perspective on it, we are about 20% below where the July expiry was at this same stage, and if you compare August to the last triple, June, then the current expiry is about an eighth of the size.
These are therefore big numbers of underlying open interest we are talking about, that directly translate into the corresponding lack of equity business as a result.
Therefore, to compensate, we quite often see a big increase in sensitivity, again, directly attributable to the lack of activity.
The enormous problem with this though, is when the market suddenly stops being sensitive to Y2, normally due to a big, or impactful, news story, and reverts to the more normal mid R ratios, as these are now a long way away.
August is just such a case, as the distance between the R1 ratios, normally referred to as the Y ratio bandwidth, is 500-points, or 8%.
At least we are in a 5-week expiry, so it has plenty of time, and being just 60-points below Y2, we may well find out quite soon whether or not, it will retain its current degree of sensitivity.
Also, August is generally a quiet month, but as it has been such a strange year already, we are not going to assume that anything will be as it has been.
Range: 6250 to 6450
Activity: Very good
Nb. Our comment on 07/27/20
Well if you knew where the ratio levels were, you would have nailed the FTSE last week.
To be more specific, not so much the ratio levels, but rather the zone levels, to be more precise.
Monday the 20th was all about the zone’s top boundary, with the market managing to remain just above it, eventually finishing at 6261.52.
Tuesday was just a rerun, with the intraday low of 6253.90, and the close at 6269.73.
Strike three, on the Wednesday saw it capitulate, the market closing dead centre at 6207.10.
Thursday 23rd saw the intraday high of 6273.63, which was a spike, as the market spent the next three and a half hours camped on the upper boundary, 6250.
The break back through the upper boundary failure, significantly, normally means a test at the other end, and we were duly not disappointed.
Although the absolute rubbish that is published on the FTSE just goes to highlight how they like to mask the facts, as officially the open was 6211.44, the high 6211.44, the low 6099.06 and the close 6123.77.
Only two of those are correct, as the open was nearer 6130, and the high was 6160, for about half an hour.
Changes the whole picture, does it not.
So, in reality, the market gapped down at the open, below the zone’s lower boundary, then went on to test it, for the aforementioned half hour, trying in vain to break back into its zone, and significantly failing.
So, if you knew where the FTSE’s zone was, last week was about as good as you could get.
Means this market is now in bear territory, and please see the table above for the levels you need to know.
Range: 5950 to 6150