Last week we tracked Caterpillar for it's entire week. This is a new week. This time I will be suggesting it's time to try an "in-and-out" 15 minute trade. If my reasonings turn out to be are wrong, they could be, I will try to explain what happened. Here is what what the markets are doing at the close on Monday.
Now here is the five day chart on Caterpillar. Now the one day chart. Are you able to see the strength coming into the stock near the closing?Sideways most of the afternoon until the last hour. Strength coming into it on the closing.
What's going to happen on the opening tomorrow? Well it's going to be a play more on how the market is going to open than a play on Caterpillar itself. Look now at these three series of Puts.
Which one is better to be considering? Look at the open interest at the end of the day in the 300 Puts with 171 open contracts. With the 302.50 Puts the open interest is 342 contracts and with the 305.00 Puts the open interest is 61 contracts . What's that all about? Traders playing the downside on an early Monday morning using the 320 Puts got an "in-and-out" dip. As the day progressed the stock went relatively sideways so traders stayed away from entering into positions in the 302.50 Puts which were close to being "in the money". They were afraid the stock could shoot up. It did. The markets were modestly strong all day. Why fight a rising market? Only 40 contracts in that series traded on the day. Then there was a late in the day rally so why not look at it's Puts again. Entering into a position to play the downside on Caterpillar Puts on Tuesday just before the closing bell is not really a bet against Caterpillar. It's a bet on the "markets" opening lower for whatever reason and pulling down everything. We note that the 305 Puts are $1.75 "in-the-money" at the closing and the ones most likely to gain if the stock was to trade down about two dollars on the opening. It could, it did today. Is that a risk worth taking? Given that the volume of trading in all three of these series of Puts is relatively light the option makers are not prepositioned have the stock move in either direction. That's a good thing. Now the pre-markets on Tuesday morning at 9:18 a.m. .The stock is down $2.25 A sell ticket in with a pick your own price might do the trick. Or wait until the opening.
The first trade of the day was in this series of Puts was a $4.75. Remember I said the open interest was light. Only one contract traded in the first five minutes of trading. The opening bid higher than $475.00 but then the stock then went sideways in the first five minutes of trading and not down. So the strategy of getting excited about the 300 Puts didn't really work. A premarket ticket asking for $5.25 for the 305 series of Puts would have probably got filled. So reading this blog was kind of a waste of time. A big sell off never happened. Trying to fight stocks in uptrends is a tough game that should be avoided. ** The down $2.25 reading at 9:18a.m. on Caterpillar quickly evaporated. Yes maybe even a sell ticket at $5.50 might have got filled at that time. Premarket trading should not be shied away . Its only clicking a request to buy or sell "at market" or at a price you pick before the markets open at 9:30a.m. In this case that would have being the best approach to take. A Jan 31st look at where the 305 Puts are at now.
The volume of trading is still light.
Comments
Post a Comment