A Massive Issue With June Options Expiration

I have been studying and researching the impact of monthly options expiration for at least 15-20 years and I cannot recall a monthly expiration that is more dangerous than the one we're about to encounter in the week ahead.

June monthly options expire on Friday of this week, and thanks to the recent huge advance in U.S. equity prices, and especially the handful of mega cap NASDAQ 100 stocks, there's record net in-the-money call premium that we'll need to deal with. Based upon our calculation, the QQQ and SPY have net in-the-money call premium totaling more than $7.2 billion. ?? I cannot recall a single month where we've ever seen more. These types of short-term issues have had serious implications with stock market performance as you can see from the chart below:

Enter S&P 500 ($SPX):

As we approach the end of Q2, I remain extremely bullish the second half of the year. I see all-time highs returning much sooner than many think possible. I've said it all along, throughout this entire rally, and I maintain my very bullish stance. However, we MUST be prepared for these options-related periods that can stymie or reverse market progress - even if just temporarily. The chart above highlights a very bearish historical period from the 19th through the 25th of calendar months and I believe it's mostly due to options expiration. The June monthly options expiration is earlier than most months, so we could see this weakness a bit earlier this month. The short-term issues that we face this month are EXTREMELY dangerous.

As a result, we've moved up our June Max Pain event to tonight at 7:30pm ET, ahead of Tuesday morning's May CPI report and the 2-day Fed meeting on Tuesday and Wednesday that will culminate with a Fed policy statement at 2:00pm ET on Wednesday.
?? Volatility will likely be EXTREME this week. ??

Accordingly, I'd like to invite you to join us for this month's session. We have a Max Pain service that we offer for just $27 per month. This would be a great month to try this out and join me for Monday evening's session. I'll be discussing where our major indices and key individual stocks could be headed in the very near-term and it could likely make or save you significant dollars. I hope you'll check it out.

Happy Trading! Tom Bowley Chief Market Strategist EarningsBeats.com Better Timing. Better Trades.