Deere On Earnings

Here is a look at Deere towards the end of the afternoon after an earnings report. It got beat up pretty bad. What we are now looking at is a printout of one option series which will be expiring the next day were trading towards the end of the trading session. Would now be a good time to buy into these 395 Calls and try to play tomorrow's upside? Lets look at how these options traded the next day. Can you see they hit a high of $4.65 sometime during the following day? I did two very small trades on the Friday morning bounce back. I just wanted to cover my commissions a make a touch. Remember Deere options are extremely difficult to play and with only hours to go before they expire its not bad to take a profit whenever you see one. .................. My times in were 10:14 to 10:31 a.m. and 10:59 to 11.09 a.m. I missed the elusive high of $4.65 which happened after I got out. Part Two. Going forward. Let's look at Deere's five day chart and look at how the 400 series o

Caterpillar. A Big Bounce.

Both Caterpillar and Boeing can jump four dollars in one day, often on no news. They each did last week on differing days. Look at these two charts which show this morning's opening and tell me what you think. My question is if you're an option trader would an opening move downwards like this excite you? Is it premature to look at playing Call options on the upside?.
Interesting charts right? It's like a bomb went off and know one know's why. Do you open a trade right now or wait for something better? They are both ugly stock charts and their both billion dollar companies. If you go the wrong way you will quickly lose money and time values will eat you away. I would say most option players would do something while keeping in mind that the bottom may not be here yet. Let's continue this story after we see what happens tomorrow.
Ok, so here is the next morning. The pendulum has swung in the opposite direction on the opening.
Inconsequential trades of no value you might say. This is a teaching website. I played it in a way to catch the leverage by purchasing extremely "out of the money" Calls on Caterpillar (the 202.50 Calls that expire this Friday). If you look at a five day chart on it you might say that is a ridiculous thing to do because it would take a miracle for the stock to ever rally to such a level. Maybe, maybe not, That's not the point. What I know is that "out-of-the money" Call options with four days to go before they expire will get a good kick of a disproportionate size if the underlying stock was to suddenly move up two or three dollars. The premarkets were strong and I wanted to avoid these strong premarkets possibly disappearing in the last hour prior to the opening 9:30 a.m opening. That sometimes happens. My sell ticket got filled at 8:26 a.m.. I picked the .50 selling price because in the premarket world of trading there are no bids and asks. That's a good story for another day.
I played Caterpillar. Could I have made more if I got out later? Maybe. Maybe not. In this kind of a situation it doesn't really matter. I just wanted to catch the full impact of a strong opening market. The point of this blog is to show how "out-of-the-money" low priced options with days to go can be an intricate part of option trading after a day which had a strong selloff. ++++ A closing note. Here is the full day's trading activity in the Cat 202.50 Calls. My exit price was the right number.
So what ended up happening on the week after this early fall off a cliff start? Well here is the one week charts on both Boeing and Catipillar. Call it a Santas Claus rally.
Now rememeber the Cat 202.50 Calls I bought at thirty-three dollars a contact and sold out happily at fifty dollars a contract? Here is how they closed out the week.
The same eight contracts I purchased at thirty three dollars each ended up closing the week at $415.00 dollars each a contract. That's over a $3,000 difference. Ouch. Happy holidays.


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