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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.

First Republic Bank

Option trading began on April 26th, 1973. Only 16 stocks had options on them including McDonald's and Ford.You could only buy Calls. Puts were introduced in 1977. By then option exchanges were open in New York, Philadelphia and San Franciso. Later came Amsterdam, Barcelona, Frankfurt, London, Osaka, Paris and Zurich. A volatilty index was introduced in 1993. I got into the business back in late 1970's. I liked trading Exxon options. I worked in a small city and in a small office of about eight sales reps. Only one other fellow who was my age followed option trading. When I had an order I would have to walk over to the "cage" and pass it to a clerk who would call a bigger city where someone wired in the trade. Exxon Calls and Puts at that time traded in increments of one-eighth of a dollar. I had one main client, a fellow with a PHD in Economics who spearheaded a group of investor friends and we regularly bought ten or twenty option positions at a time. If we had a score, like a double in two days waiting for the fill to be processed was often a game of trickery. Sometimes the clerk would catch the manager who was sitting like fifteen feet away in a different office and who also had a book of business and ask him, for example, if she should give me a fill at $4.50 at not the $4.75 it actually traded at. How was I to know? That happened frequently. That plus the main office in the bigger city would also sometimes take a cut of the action. These antics sometimes infuriated my clients who were being regularly short changed. Late in the afternoon fills were sometimes reported the following day. I kept a ledger of my clients trading activities. It wasn't available to online. Interesting times That organization later imploded when a rogue broker in one of their offices lost millions of dollars. I was never privy to the exact details as I had moved on to Merrill Lynch across the street which was a better operation. The good old days. What's happening here? Trading halted?
First Republic Bank was down $10.75 last week to close at $3.51. Image buying a Put on it two months ago when it was trading at over $100.00. Put options, in special situations can pay off in spades. Mining stocks sometimes take a tumble. Roku, Deere and Snowflake can take a tumble. Make a "tumble list" and update it regularly. Learn to make Put options your special best friend. Finally, last week I missed an opportunity which has me "kicking the can" this week. I talked about it in my last blog. Good earnings on Caterpillar which then surged up after a sleeply morning start. Learn which stocks can jump ten dollars in one day. A few months back Caterpillar jumped big time on the announcement that it wasn't going to go on strike. It has the propensity to move quickly. Profits on last weeks earning report were right there to be made. I encourage you once again to take the time to make Calls and Puts some of your best friends.

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