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Costco. It's Short Term Options

 Options on stocks in the $1,000  range often move  50%  or more in only a matter of  minutes on the opening on Wednesday and Thursday's . The trick is to  anticipate correctly which way the markets are going to move. That's a fools game you might say? Yes and no. It may not be a game you ever play but it might be something to consider to put in your bag of tricks when you are on a role. One thousand dollar stocks sometimes move five, ten or fifteen dollars on the day. If you have profits it's best to take them quickly. Costco is a prime example of that. Let's look at this mornings action. First it's five day and one day charts. Tuesday's trading was kind of choppy. Might it drop on the opening tomorrow? Here is a look at where the 1,035 series of Puts closed that expire this Friday. They closed at $8.50. It looks like Costco cycled up about five times yesterday. Given a weak market opening doesn't it stand to reason a three or four or five dollar will be i...
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Caterpillar - An Observation That Defies Logic

This observation totally defies logic. The markets go up somes days and down some days. It's something like 50:50 right? How do you explain this? Here is how Caterpillar traded on Thursday Dec. 14th.
Yes Caterpillar is on a role.
It is up 14 of the last 15 days. Now here is the only news I could find on it this morning.
This isn't really news because it's dividend was never really in question. Come to think of it, it's really bad news given that earnings were up strongly in the last quarter. Why isn't the company sharing it's profits? Is it buying back shares? Now here is a chart from September showing how Caterpillar gave up a gain on a Friday. It could happen again?
So now what? Look at this.
It's the 285 Puts on the close today with only one day to go. Look at the open interest. ZERO! Look how cheap they are. Couldn't the stock retrace half of it's gain? Why aren't traders looking at this? Even if I am wrong I find it so strange that traders do not see the value in this! On the flip side here is the open interest on the Calls. All of this is so interesting to me. Now a look at the Calls.
All of these traders are hoping for a pop on the opening and some traders are willing to pay money for the $290.00 Calls.
Here shown about was its Fridays morning chart and here are some of the Call and Put printouts. First the Calls. Remember they closed at $1.86.
Now the Puts near the opening. Remember they closed at $1.89.
Then this. Two hours into the trading things were holding steady. Where was the big dip we were hoping for? What happened to the hope of a five or seven, or even $15.00 decline?
Now here is the chart on the day.
Finally this at the end of the day. This series of Puts expired "out-of-the-money" and the final trade was at $.05..
The stock somehow was steady all day and both the Call and Puts holders got burnt. Here is the new five day chart. Are there lessons to be learned? Well if the open interest in a series of Puts you are looking at is zero, you should spend more time thinking why that is. Secondly if you were in the position of hanging onto the 385 Puts you had opportunities to get out and get most of your money back. Maybe in future trades when you find yourself in the same situation let this experience be your guide. Yet that doen't mean it never happens.

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