All major equity indices seem to have completely recovered after the turbulent spring of this year: QQQ and IWM are near their all-time highs, SPY is trying to do the same. All of them are flirting with overbought levels according to the RSI(14) indicator.

As always observed in this complacent market, implied volatility is relatively low and all Volatility Indices are hovering near their lows since January. Options mispricing disposition is also typical for this market: puts are overpriced (except for IWM ATM puts), calls are priced mostly fairly.

Mispricing summary for the options with two to five weeks until expiration:

Major opportunities are observed in the overpriced short puts on SPY and QQQ despite the overall low implied volatility. IWM demonstrates mixed picture: OTM puts and ATM calls are overpriced in farther expirations, ATM puts of the near-term series are underpriced.

All three indices little changed last week staying in the narrow ranges near their local (SPY and QQQ) or all-time (IWM) highs. Today’s political turmoil in Italy has moved SPY slightly lower, provoked some spike in VIX and VXN but has not led to any meaningful reaction in QQQ and IWM.

The mispricing disposition for options on SPY and QQQ has not changed since last week. Options on SPY with expiration 4-5 weeks remain in a quite significant mispricing mode: puts are still substantially overpriced while calls are underpriced. Options on QQQ are priced mostly fairly except for the puts with farther expirations. IWM puts are overpriced in OTM and fairly priced ATM; calls are substantially overpriced in all expirations.

Mispricing summary for the options with two to five weeks until expiration:

Major opportunities remain mostly in short puts and long calls on SPY. Overpriced IWM calls, especially ATM, can be candidates for selling, including in a covered call strategy.

SPY and QQQ have been fluctuating in narrow ranges near their local highs. IWM has broken up the resistance level of its recent highs and continued its short-term uptrend entering the overbought territory. Volatility indices have been staying at their lows since January.

Options on SPY demonstrate a quite significant mispricing: puts are mostly overpriced, especially in farther expirations, while calls are underpriced. Options on QQQ are priced mostly fairly except for the puts in farther expirations. IWM demonstrates a mixed picture for the various moneyness and expirations.

Mispricing summary for the options with two to five weeks until expiration:

Major opportunities are observed mostly in short puts and long calls on SPY. IWM long puts and short calls (both ATM) can be considered as a directional play for those who expect a downward correction.

All three equity indices have jumped to their highs of the recent months entering the slightly oversold territory. Volatility indices are at their lows since January.

SPY and QQQ return statistics indicate that even in an oversold regime they both tend to either move higher or stay on the achieved levels. Implied volatility is usually low but puts are still overpriced due to the not that big probability of a significant move downward. Meanwhile, IWM has another character in this regime since it is more susceptible to the negative news and usually more ready to correct down. Combination of such behavior with low option prices makes IWM near-the-money puts underpriced.

Call options are priced fairly except for ATM calls on IWM.

Mispricing summary for the options with two to five weeks until expiration:

Major opportunities are observed mostly in puts: SPY and QQQ with 4-5 weeks till expiration. IWM ATM near-term long puts can be considered as a directional play with downward move expectation.

All three indices have been fluctuating within the recent months’ range toward the end of the earnings season. RSI(14) was again hovering slightly above 50 mark showing neither oversold nor overbought condition.

Option prices have been keeping their move to fair values leaving less mispricing opportunities. Overall, the options market is getting back to normal: puts are overpriced (mostly OTM), calls are priced fairly.

Mispricing summary for the options with two to five weeks until expiration:

Opportunities in QQQ persisting in the previous weeks have almost gone; just OTM puts remain overpriced. Overall, some interesting mispricing is observed only in the OTM puts area for all three indices.