CAT Puts

Let's start with this. Caterpillar has an earnings report coming out on April 30th. You should listen to it. It's not going to be difficult to find. Now look at these how these two series of options closed out the week. The Calls are just "in-the-money" and the Puts are just slightly "out-of-the-money".The cost to play the upside with one week options almost equals what it costs to play the downside. That's kind of strange as usually the Calls cost more to purchase than the Puts. Both are super expensive however Caterpillar as of late can jump $15.00 or $20.00 dollars in one day. When I say super expensive what do I mean? 2,690 means $2,690 Americian per contract. That is not chump change. You would have to have a very strong conviction it was going to move one way or another before you would want to jump in. Yet there is bigger problem. The current price of the stock is in a nose bleeding territory. Look at it's one year chart. Is it really doing ...

First the chart. On paper it looks like this chart could rebound. Here is one series of it's "in-the-money" Calls. Here are three reasons why this situation is to dangerous to play. 1) There is an Avis Budget Group Inc. implosion happening today. A really big one. Read my previous blog. That's not directly related to this company but it makes the sector a bad space to be in. 2) The "bid-and-ask" spread is to far apart which helps to give the market makers some extra insurance. That plus the volume of trading is very light which also seems to give the house an advantage. Look at Walmart. The spread is about the same but you can split the middle without affecting the "bids-and-asks" and the volumes are so much better. I like trading in that kind of space better. 3) Hertz is not the kind of company which comes out with daily or weekly updates. Contrast this to the stock Ford which seems to have good and bad news coming out every other day. With Fo...

I blogged about this one the day before. Here is todays action at 11:a.m.. The stock took a massive hit. Is the short squeeze unwinding? Let's move onto Thursday morning. That's a drop of over 400 dollars in two trading sessions. Now a look at these two series of Puts at 11:00 A.M. on Thursday morning. Look at the volume of trading in the second series shown. ... So many questions can now be asked? Is this a "catching a falling knife syndrome? Is this stock going back down to the $100.00 like it was trading at last month? Might it now catch a slight rebound? If you just made in the last two days like $50,000 playing the Puts starting with $5,000 would you now risk like $5,000 again and throw it back into tomorrow's expiring $255.00 Calls? Thousands of traders are now glued to their chairs watching this unprecedented action. Might you buy next week's out 255 Call series? To help better put this into perspective here is it's one year chart. Thursdays at n...

Hertz Global is on a terror. . Stocks in the $5.00 range sometimes do that. Yet really it's the Avis Budget short squeeze that is causing this stir. Look at how it jumped just over $105.00 dollars today. How often do you see a chart like this? It's a short squeeze and the stock is trading on high daily volumes. At one point this morning (a Tuesday) there was a "stop trading" on it. Trading options on it defies logic as they are so expensive. Look at this one example. These are the 700 series of Calls and the stock is only trading at 11:17 a.m. at $665.00. In other words they are $35.000 "out-of-the-money". Look at how crazy expensive they are. The stock would have to jump $105.00 or one hundred and five dollars by the end of the week just to break even! Who would be crazy enough to make such a bet? Day traders would be because they are banking on the effects caused by the stocks interday momentum. Let me explain this better by showing you an end of day re...

This blog is not going to be an exhausting study of this topic. I just want to show you a few charts found in recent blogs and comment on which ones seem to skirt the issue of "time-value-concerns' and which ones don't. 1) Avoid Thursday at the close Call options. In this case Thursday is the second last day of the above chart. If you guess the wrong direction on the close it's going to be game over on Friday when the options expire. Thursday at the close on options that expire the next day are the biggest time value traps you can buy into. If the stock moves in the wrong direction it's game over. 2) Ford on a Monday going into Tuesday. On this chart April 13th is a Monday and Tuesday is the 14th. Can you see Ford closing strong on the close of the 13th? It would make sense to get in on the stong closing because these Calls would still have four trading days to recover if Tuesdays opening was not all that spectacular. 3) This time it's Caterpillar and it...