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.

500 Point Daily Moves

Trying to understand option trading on a Wednesday when 500 point daily swings in the market are the near norm is a challenge. Look at these five stocks and their five day charts. A lot is going to happen in the next two days and the gamble is if the markets go flat or go up just a little bit or if they go flat or go down you're going to lose. Looking at it that way it's best just to stay away. Look at the low Call volume on Boeing, Deere, Snowflake, Caterpiller and Ford. Next to nothing really. Why? Well traders don't get a second chance playing short term Call options if the markets suddenly start to go against them. It's like flipping a coin. Well it's worse than that. Your playing against computer generated logarithms which will eat you alive. That's why many option traders take holidays or reset days when the markets get this crazy. Option trading is all about taking resets. Pausing and then looking for things more comfortable to watch like the coming of earning reports.
Note, a reasonable amount of volume but not a speculatively high crazy volume.
Deere Call option trding is always pretty light.
Barron's recently reviewed the company and gave it high marks for being on top of their gameplan.
Very light trading here.
(The electric auto stocks are hot this week with Ford leading the way announcing $10,000 price increases on it's electric trucks which is something they can do after reporting recent earnings of three billion dollars or some number like that. All of this activity is late morning trading on Wednesday. Let's now jump ahead to the closing bell of Thursday August 11th, the next day. It will be interesting to see how many of these stocks continue in their breakout trends. Will buying into this upward momentum be rewarding? Here are all five stocks.
After a stock has had a one day spike upwards it's difficult to keep the momentum going.
Here we have a double with daytraders cashing out on the spike yesterday.
Notice the Calls trading up on very light volume? Finally there is Ford and Call options on Ford always attract attention.
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Lets see what happens tomorrow and add to it a closing statement. Here is what happened with comments to follow.
Now Caterpillar.
Then Ford. Because of it's lower price, the price swings on a percentage basis can be quite large.
It was a strong week. Final comments to follow. 1) Boeing went from $6.17 to $5.00 2) Deere went from $5.55 to $17.29 3) Snowflake went from $13.70 to $8.40 4) Caterpillar went from $5.90 to $11.43 and Ford went from .51 to $1.15. In big picture, one set of options tripled, two sets of options doubled and Boeing and Snowflake slightly disappointed. This was a strong week with a Friday rally which was the iceing on the cake.