On Friday afternoon a trader may look over the chain and note a few strikes for Monday. Those notes are written against Friday’s closing price. If the index perp moves over the weekend and the cash open follows it, the notes describe a market that is no longer there.
At the money moves with price
The at-the-money strike is whichever one sits nearest the current price. It is a position, and it travels. After a gap, a different strike holds it. The strike that was at the money on Friday is now in the money on one side and out of the money on the other.
Everything a scalper cares about follows from that position: how much the option moves when the index moves, what it costs, how much of its price is time value. Choosing a strike for a same-day scalp is a decision about distance from price, so it has to be made again once price has moved.
The same strike is a different trade
Take a call that was slightly out of the money at Friday’s close. After a gap up it is in the money. It costs more, it tracks the index more closely, and less of its premium is time value. The put at the same strike has gone the other way. It is now further out, cheaper, and closer to the long shots described in the far out-of-the-money trap.
Neither is better or worse. They are different instruments carrying the old label.
The room to the walls changes
Call and put walls sit at strikes with heavy open interest. Options did not trade over the weekend, so on Monday morning the walls are where Friday left them. Price is somewhere new. A gap up starts the day with less room below the call wall and more above the put wall.
When the move is large enough, price can open at a wall or beyond it, which is the case covered in a weekend move that lands on a wall. And once Monday’s options begin trading, the walls themselves can shift.
The expected move starts from a new place
The day’s expected move is measured around where price is. A strike that looked reachable from Friday’s close may sit outside the range from Monday’s open, or well inside it. The same check applies as on any other day, taken from the new starting point.
Notes that survive a gap
The practical fix is to write Friday’s notes in relative terms. The first strike above price. The strike nearest the put wall. The last strike inside the expected move. A note written that way still means something after a weekend move, because it names a position on the chain and finds the strike on the day.
Where NoVo shows it
Trader shows the implied open from the index perps while the cash market is shut, so the size of the weekend move is readable before the bell. During the session it shows the gamma flip, the call and put walls and the expected move on SPY, QQQ and IWM.