Options Market Signals Limited Upside For S&P 500 By Mid-June: Crucial Levels To Watch Out For

U.S. markets ended in the red on Wednesday as the debt ceiling stand-off continued without any resolution. The S&P 500 index has logged two consecutive days of losses now, closing at 4,115.24 during the last session.

With the political deadlock continuing and Fitch putting the U.S. ratings on negative watch, the short-term outlook for the index does not look too encouraging. To find better clarity on Wall Street's take on the S&P 500 in the near term, here's a look at the options market outlook on the index:

1. Resistance: It is clear that taking into account the current uncertainty, professional traders are not expecting the index to decisively breach the 4,150 level on the upside by mid-June. For options expiring on June 16, open interest accumulation indicates maximum concentration among out-of-the-money Call options at the 4,150 strike. It is noteworthy that it factors in current uncertainty, although any positive developments could change traders' views in the coming days.

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2. Support: On the downside, traders are expecting the 4,000 level to provide decent support in case of a sell-off. This is because the maximum open interest figure among out-of-the-money Put options for S&P 500 options expiring on June 16 lies at the 4,000 mark with over 150,000 open positions. This shows there's a significant conviction about the support level.

It is noteworthy that open interest levels only provide a fair idea about support and resistance levels. Any major news break or macro event could lead to significant movement in asset prices and a subsequent shift in open interest levels.

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