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What To Focus On - Part Two

My blog of November 27th was entitled "What to Focus On". Please read it. This week we are feeling a bit of a hangover. Last's weeks triple witching event is over. Stocks that were forced to contract in price to sqeeze out spectatate positions on them are now free to resume there old trading patterns. This Monday morning at 10:20 a.m. the Djia is up 301 points. There are also losers. So now what? Mark on your calendar exactly three months down the road how the markets traded on the first morning after one of these triple witching events and use this same logic to catch the upside on the next "hangeover" day like this. How do you pick the winners? Find a few stocks that have enjoyed a recent upswing and play them to pop on the first trading session after one of these events. This blog is just an observation.

Hog Again (Harley Davidson) and Caterpillar

Back on November 3th 2021 I wrote a blog about Hog and I was of the opinion that stocks in the thirty and forty dollar price range were difficult to play. They are and it takes good news to cause them to pop. Today Harley Davidson popped on an earnings report. Here is a five day chart which shows how much it bounced. It's difficult to watch everything - I missed it. Noted here also is a reference to "LiveWire", a spin off of it's electric motorcycle division.That's something worth investigating.
Now here is it's chart showing todays activity. After you look at it I have an interesting observation to make.
Here now is a look at how the 38 series of Calls traded on it today. What is of interest is the number of open interest Call options going into the opening and the total number of options traded today. Nobody was playing it, meaning the outstanding open interest going into this earnings report was very low. After you look at this chart I will try to better explain why all of this is so interesting.
Notice now that traders were able to buy into this situation in the first ten or twenty minutes of trading at bargain prices. Yes the 38 series of Call options were "out-of-the-money" but the stock had a reason to go up. Their earnings where a great suprise. With other stocks that are higher priced like Boeing and Caterpillar when they have good earning reports before the bell opens they are mostly likely fully priced on the opening. It also helps that the markets in general were strong today. I found it strange that "late-to-the-party" option traders were able to profit on this morning's news. In a way this stock might be in for a rough ride even if sales pick up. Longer term like a year out rising interest rates will slow the rate of sales. On a different note I talked last week about Caterpillar and showed a five day chart of how it swings. Caterpillar today started to sell off around two p.m. and here is what it's chart looked like when I purchased a 200 series of Call option on it.
Now look at this second chart.
I was lucky to get out four minutes and four seconds before the closing bell as the stock started to drop just after that. It was a 74 minute hold. Look now of how few contracts traded on this series of Calls today. Trader's are not excited about it's five day chart and playing interday swings is a lot of work.
The only downside in taking a short term profit is that if Caterpillar jumps up on the opening tomorrow I miss out on a bigger move. Here is another look at it.
Finally, here here is how the Cat 200 Call series opened on the following day. Note how light the volume is.

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