A lucrative expiration day constellation in the DAX

Dear readers,

As is well known, there is only one “small” expiry day in July and it is almost two weeks until then. However, the constellation on the expiry day on the futures exchange appears very promising with a view to the DAX, so that an early analysis is worthwhile.

The current expiry day chart of the DAX for July

At first glance, the current expiry day diagram shows the unusual situation:

Expiry day chart DAX July 2020

You have to open the diagram a lot to see the main positions. The large call positions (blue bars) at or above 13,000 points are not surprising – after all, the high of the DAX in the recovery since the end of March has been 12,913 points.

But the second largest call position at 12,500 points, which seems a little lonely, is unusual. And it is almost surprising that a significant number of put positions (red bars) can only be found from around 11,000 points. In the meantime, three or four other small put bars are lost in the otherwise almost yawning empty area between 12,500 and 11,000 points.

This unusual constellation with its almost complete absence of larger put positions in the current price range is also interesting from a mood-related point of view: the bears seem to have removed the sails!

These two brands are particularly important until the expiry date

Apart from that, there are some revealing tips for DAX trading on the expiry date. The DAX is currently listed in this area between the large call positions at 12,500 and 13,000 points. Above all, the concentrated load of calls at / above 13,000 points should slow the bulls’ ambitions until the expiry date, especially since – as already mentioned – there is also the previous recovery high as a technical resistance. A breakout upwards is therefore unlikely until Friday next week.

The 12,500-point mark, on the other hand, could be both a target and support until the expiry date. It can be used as a price target because the writers there could release their hedges that they are now likely to have taken on for these positions. The release of these hedges could temporarily cause some downward pressure in the DAX in the corresponding price range, but this suddenly disappears below 12,500 points. In the otherwise rather bullish environment, the 12,500 mark would also be an important support.

This is also confirmed by the technical chart analysis:

DAX - daily chart since February 2020

Chart technology also confirms the expiry date constellation: Yesterday’s jump over the red downward line since the year high has taken the DAX another hurdle on its way to the end of the correction. The bulls are now aiming for the aforementioned June intermediate high of 12,913 points and the round 13,000 point mark. There the writers should then take action and press the course again.

On the other hand, the bottom edge of the green upward trend is rapidly approaching the 12,500-point mark from below. Together with various other short-term technical chart support, the expiry date should ensure that the DAX does not slide too far below this level in the next few days.

The intersection of the trend bottom edge and the red downward line is shortly after the expiry date at just under 12,550 points (see blue circle) and thus exactly in the area of ​​the striking large call position. It is therefore to be expected that the DAX will continue to fluctuate within a comparatively narrow range between 12,500 and 13,000 points by the end of next week (as indicated by the gray forecast lines). This also fits the usual wait-and-see attitude of investors in the run-up to the quarterly reporting season, which only really picks up speed after the expiry date (see Internal Exchange of June 29, 2020).

Just trading the sideways movement?

This gives traders the opportunity to “simply” benefit from this sideways movement, although the limitations of this sideways movement are somewhat vague. This is obvious on the underside, because no dominant support is discernible or (changing) trend lines provide support.

The top edge is also only apparently well defined. The call positions at 13,000 and 13,100 points alone result in a range of 100 points, which – depending on the trading style – can be a lot. Above this, the large price gap (gray) begins at 13,236 points, from which the DAX could also be thrown back.

What you should pay attention to when trading

So, especially on the top side, false signals are to be expected again. It may therefore be most sensible to trade precisely these false signals. If the DAX rises above 13,100 points, you must also expect that the protection measures taken by the writer for the large call positions there will drive the price up dynamically. Then the price gap – within the span of which there are naturally no further resistances – could be bridged quickly. And then it’s not far to the all-time high of the DAX …

So there is definitely a lucrative constellation in the DAX on the expiry date, but trading can be very “tricky”. In any case, I wish you every success!

Best Regards

Yours Torsten Ewert


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