The Temptation of Buying A One Day Call On Thursday Afternoon.

It's usually better to wait until Friday morning and then deciding which way the markets might go. They can however on Thursday afternoon be tempting. Thursday was a trick with Boeing only up $.02 cents on the day. Here is it's one day chart. Playing it from (9:30 a.m. until 11:00 a.m.) was the way to go. On Wednesday we referenced Boeing looking like it's old self again. Now look at this. Focus on the chart from 1:00 p.m. unti 2:30 p.m. That period of time could have got Call option players excited. Experience also tells us that the 2:30 p.m. - 4:00 p.m. period of time is one of most dangerous times of the week to be looking at Call options that expire the next day. Now here is it's full one day chart. From 2:30 p.m. until 4:00 p.m. it really did nothing, with no indication of would happen on the following morning. Do your own homework to see if you concur with this logic. Now Friday morning and the one day options that expire at 3:00 p.m. this afternoon. Only 355

Roku. Call Options On It That Expire The Same Day

Friday morning at 10:12 a.m.. First a look at the stocks five day chart. Not much to look at right? It seems only to be going sideways.
Now a look at the 63 series of Calls, the 64 series of Calls and the 65 series of Calls all of which expire at 4:00 p.m. today. The 65 Calls are a bit of a stretch.There is a with rule that states that all option traders holding options that expire that day have to be out of their positions by 3:00 p.m. and if not, the brokerage firm can and will liquidate your holdings "at market". Usually they will give you a telephone call you first. They have your number. They are polite. Sometimes you can push the limits on that rule and sneak in a touch more time by having a sell ticket in for an amount slightly above the current bid and ask. Why would someone be crazy enough you might ask to be sitting in one day options? One reason is that day traders could have bought in on the previous day's closing hoping for an early morning rally or early morning selloff. Well with stocks like Caterpillar and Boeing that strategy makes sense with five dollar swings on these stocks sometimes being a common occurance. Caterpillar for example sold off $6.45 today. A second reason might be is that some option traders are buying in just after the market opening looking for a market reversal. A recent blog on McDonalds shows how the strategy can sometimes pay off in spades. If you have the time please read that blog. In this case Roku has being going sideways for over a week so one wouldn't really expect major changes to be happening today. That said, look at the trading action on these three series of Roku Calls that will be expiring today. These printouts are as of 10:12 a.m. and 10:13 a.m. this morning.
Notice all of these current bids and asks are below the highs of the day. When did the highs of the day happen? Well they happened at exactly 10:00 a.m. See the chart below as of 12:32 p.m. to prove this action. Between 10:00 a.m. and 10:12 a.m. the Roku 63 series of Calls went from $1.40 down to $.91 cents. Then they continued to fall. This would have been the time to be in Puts. This up and down kind of crazy action happens all day in one day soon to expire options.
What happened as the day progressed with Roku options? Well look at the action at 2:01 p.m. The 63 series of Calls were trading at $.89 down from $.91 at 10:13 a.m. They did however dip a lot lower between the reading of these two printouts.
Now look at this. The 63 Calls were trading at $.31 cents down from $.33 cents.
Now what?
How do you think the day ended? The Calls ended down with the 64 series of Calls for example last trading at $.46 cents.
What series was the real winner on the day? The Roku 64 Puts which traded down to $0.32 at 10:00 a.m. and then rebounded to as high as $1.40 at 11:00 a.m. Scroll upwards to the chart of the day to see how that was possible. What is there to learn from all of this? First, the option markets providing these quotes is relatively tight, fluid and fair. Options can change in price by 30-60% or even more in less than sixty minutes. That happened today. Directional moves can happen without spikes in the volume of trading. Fills are instanteous without dealing with the game of wiggling their bids and asks when a new order comes in. That sometimes happens on thinly traded option series especially during mid week periods. What's more,10:00 a.m.,10:30 a.m. and 11:00 a.m. can sometimes be pivotal time periods.This may be caused by AI trading. In afternoon option trading on options that expire that day there are fewer pivotal time periods. Most of the action in "one-day" option trading happens in the morning except on the days where the market jumps like 600 points in one day. On those rare occassions stocks can sometimes jump six or ten dollars on the day and close at their highs. Those are exciting days to be in "one-day" options. The final point is that most novice option traders shy away from trading one day options. That only makes sense. If perhaps they read more blogs like this they would start to think differently. ** A March 24th update. Barron's made note "Roku Director Makes First Insider Purchase Since Its Public Offering" noting the stock has fallen 34% this year and quoted an investment firm as stating it as being "an opportunistic move that sends a compelling undervalued message at the streaming platform."


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