Featured

Young People And Options

Let me spill out some information. Next-Generation Investors Are Different. An organization called "Finra" published this information. In a 2021 survey the Finra Investor Education Foundation found that 36% of respondents aged 18 t0 34 said they have traded options. That compares with 21% of respondents ages 35 to 54 and just 8% of respondents age 55 and older. Then there are crypto investors. According to something called a Pew Research survey based on Feb 2024 data, 42% of men aged 18-29 have invested in, traded, or used cryptocurrency compared with 17% of women in the same age range. Interestly, just 17% of all adults say they have invested in, traded, or used a cryptocurrency, according to the same 2024 survey. When it comes to buying on margin,in 2021, just under of a quarter, or 23%, of investors ages 18 to 34 said they have made purcheses on margin, compared with 12% of respondents aged 34 to 54 and 3% of respondents age 55 and older. Opening accounts is now easier and...
Post a Comment

Caterpillar Down Almost 5% On The Day

It happened with no warning. It just dropped for no reason. Early in the morning it dropped and then stopped and looked like it wanted to make a rebound. Then it sold off further.
The company announced one employee of twenty years or so was being given a new position. That's the only news I could find on it. The following day, stories emerged about how other stocks in their sector had problems. Caterpillar is a company with relativey few news releases and that's why many options players like to trade them. In their earning reports they compare their profits and losses in all parts of the world they operate in. Investors like to see that. Today was different and the stock just dropped. A thirty day chart shows how that it was possible.
Now what? Earnings come out in about two weeks and they are expected to be better. Our world is being torn apart and the equipment Caterpillar makes to rebuild our planet is in high demand. Caterpillar is also the kind of company that can pass on price increases to their end users. What happened today was a "one off" yet I would't be to quick to buy back in. Maybe the lesson here is not to holding any Caterpillar stock or Call options two weeks prior to an earning's report. Let's see what happens. Oct 19th, the day after. Now we are back in the price range of where the stock closed 90 days ago.
Will it drop on the opening and turn around and go back up again? Let's see. Call option traders have learned to stay away from downward action such as this. It's difficult to stay awy from Call options after a stock has dropped all week. Caterpillar has had a bad week. He is how the 252.50 Calls which were slightly "out-of-the-money" opened on Friday morning. Traders stayed away.
Anyone in the 252.50 Calls at the end of the day got smoked as Caterpillar closed at $249.10. Here is how the markets and Caterpillar ended up closing on the week.
Can a stock keep dropping forever? One would think that a weekend would offer relief and possibly a change of thinkings. Here is Fridays action on th 252.50 series of Caterpillar Call options that expire next week closed today and the 255 series of Calls. Can you see how option traders are opening up new positions. That is to be expected when a stock potentially becomes oversold. This game is never ending.
Now for one final observation. Forward thinking Call option players might have being tempted to pull the trigger and purchase some of these "one-week-out" 252.50 Calls on the opening this morning, even thinking of cashing out later in the day on a dead cat bounce. Look at how expensive they were at 9:52 a.m. Dead cat bounces on Friday seldom happen.
Option timing in option trading is everything.

Comments

Post a Comment

Popular posts from this blog

Living on Kraft Dinner?

Image
What does the word disconnect mean? As a verb it means "to sever or interrupt the connection of or between; detach". Option trading - one day options - is a disconnect from the world. What happens to slightly "out-of-the-money" Call options on Costco when the stock shoot up thirty dollars on the day? I will show you what happened on Friday to Costco Calls and the options on a few other stocks I frequently watch. What a disconnect from the real world. But before that a look at how the indexes traded. 1) Costco. It's five day chart and a look at how three of it's option series moved upwards in one day. You may not know how to read these printouts but try to read the highs and lows on these option pricings. One printout shows an "at-the-money" option which means you are buying a contract on the stock, good for one day only at a locked in price equal to (or very close to) what the stock is currently trading at. The other two contracts shown are ...
Read more

The Little Engine That Could

Image
Walmart again. It's all I seem to blog about. Here is it's five day chart. The stock keeps going up and the option series are set up in one dollar spreads. Even a fifty cent move on the stock moves the needle on these Calls. Look at how this series of Calls was trading yesterday at 3:00 p.m.. Now here is this same series of Calls just before noon today. Thirty days of upward action like this punctuated by the off day of decline. Now notice the higher volume of trading in the series of Calls with the higher striking price. These are the ones's with more leverage. At the same time look at the five day chart on Costco. The two stocks sometimes trade in tandem. Humpty dumpty sat on a wall .... a had a great fall. Someday soon a fall might happen but what a great ride it has been.
Read more

A Fireside Chat - One Year Options and Thirty Day Options. Which is Better?

Image
Some say to think small, not big. Trying to play Disney options is thinking big. It is a stock slighty out of favor. If we start with it's a three year chart, we will see it is down by about 50% over that period of time. Now it's one year chart. If the stock can break 110 in early 2024 the sky is the limit. It does have a lot of moving parts so anything could happen. Look at these Calls options one year out. One year in options buys a lot of time.They look reasonable. If the stock ever inched up to the $105.00 price level in the three or four months these options would jump up in price by about 50%. Even more if they had really good news. Yet it's the "what-if" aspect of the equation that castes such a trade in doubt. "What if" stories just don't cut it. There are to many variables in play. Then again, why are we even thinking of long-term Call options after a December's rally? Let's switch gears. If consumers are out spending for X-mas...
Read more