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.

"One-Day" Puts That Crazy People Can Play - Netflix

Read the previous blog first, about Exxon on Friday. The Puts on it's last day before they expire options increased in price in the last few hours of trading. So to did the Puts on Nexflix on that same afternoon. Can you see how it sold off six dollars in the morning trading session (the first chart below) only to rebound almost three dollars? Then the stock got tested again and this time it lost it's steam.
Then what happened? Well here are the 470 Puts at 12:08 p.m. which expire at 3:00 p.m. The stock looks like it is trading in a channel downwards. See the chart below.
What next?
Yes the stock continued to drop approaching the 3:00 p.m. deadline/ expiracy time date. Now look at the same series of Puts at 2:12 p.m. They were trading at $490.00.
Looks so easy right? Let's check out it's five day chart and it's year-to-date chart.
Yes on Friday it looked like it wanted to roll over. * Two things. The reality of trading short options like this. Lock yourself in a room and run a bunch of moniters. Lots of cool stuff can happen on a Friday afternoon. If you going to play in this market focus on stocks in this price range. You need a stock that can swing three or four dollars in one day. Lower priced stocks do not. Big swings at this time of the day - like plus or minus $1.00 swings in fifteen minutes often happen. At some point in time take your profits and turn off your computer. There will always be another trading day. ** On the following day Netflix was down after $12.00 mid afternoon. What a drop.
Keep all of this in mind the next time you are thinking of the stock. It can move quickly.


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