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This One Is Too Nervous To Watch. Pfizer

This is a short blog full of twists. Try to get through it. First a five day chart of Pfizer. chart. In the past week it was up $1.05 and it was the 7th most activity traded stock on the NYSE most active list. It's in a breakout mode. Look at how it traded over the last three years. This breakout mode might last a few days, weeks or months. This stock has a history of moving somewhat slower than most stocks. A second quarter earnings report comes out July 30th. If it's good that could add a touch to the stock's price. Now this. As a general rule stocks and options on stocks in this particular price range are difficult to play and in this case everyone is following the same story. Fred down the street and John around the corner and Mark across town are all dialed into the same commentary. There is nothing that really gives you an edge when it comes to playing it. That's the problem. Here now is a look at the Pfizer "next-week-out" $30.00 series of Call optio
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Towards Understanding the Bids and Asks and a Look at Friday Morning Reversals on An Option That Expired That Day.

Trying to get a fill can sometimes be an exacerbating experience. On Thursday of last week I wanted out of a Caterpillar 175 Call and had to cancell and wait and resubmite my ticket three times. Why? Whenever my sell ticket would pop up halfway between the bid and ask they would bump down their bid. Cancel my ticket and the bid would move up again. Now take a look a this quote. This time it's of Caterpillar last Friday thirty nine minutes into the trading session.The stock was clearly dropping.
At 10:09 a.m. Caterpillar was going down in price after a slight morning uptick. Look at how wide apart the "Bid" and "Ask" where on the Caterpillar 180 Puts. If you want to buy in and place an order of lets say $1.40 what do you think will happen? Watch the bid jump to $1.40 and the ask to $1.65. If you let it sit for a couple of minutes and nothing happens you might decide to cancell your order. What typically then happens is that the bid and ask will drop down again, perhaps to bid $1.20 ask $1.49. It then becomes a bit of a game of cat and mouse. The net effect is that the house wins. Why? Well these are Puts and if the stock starts to drop in price then you are shut out of the action. By keeping you out of the action your not catching a strong directional move. Now look at what happened. In this instance, these Puts in the $151 range ended up trading as high as $239.
Here now is it's one day chart.
Lets now go from the 10:09 a.m. printout to the 4:00 p.m. printout.
Once again. the high on these Puta was $2.39 which doesn't leave much profit if you bought in at $1.51 range on small quantities. The name of the game would be to buy in during the first five minutes or so of trading before it's reversal downwards actually started to happen. These options traded down to a low of $.43. You can see all of this better if you look at it's five day chart as shown below.
It closed Thursday at 183.14 and jumped slightly in the first few minutes of trading to 184.33. That's when you would have had to jump into the Puts for like $.50 a contract to triple your money in the first hour of trading. Yet then again, that's what last day option trading is all about. Who would be brave enough to be purchasing the 180 Puts that expire that same day on a stock heading up to the $184.00 price range? Some people would, knowing that Caterpillar had dropped on the previous opening to under $175. Friday mornings are the best time of the week to catch this type of action. You have to be glued to your seat if you want to attempt this type of trading.

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