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Deere On Earnings

Here is a look at Deere towards the end of the afternoon after an earnings report. It got beat up pretty bad. What we are now looking at is a printout of one option series which will be expiring the next day were trading towards the end of the trading session. Would now be a good time to buy into these 395 Calls and try to play tomorrow's upside? Lets look at how these options traded the next day. Can you see they hit a high of $4.65 sometime during the following day? I did two very small trades on the Friday morning bounce back. I just wanted to cover my commissions a make a touch. Remember Deere options are extremely difficult to play and with only hours to go before they expire its not bad to take a profit whenever you see one. .................. My times in were 10:14 to 10:31 a.m. and 10:59 to 11.09 a.m. I missed the elusive high of $4.65 which happened after I got out. Part Two. Going forward. Let's look at Deere's five day chart and look at how the 400 series o

Explaining How The "One Week" Until Expiring Call and Put Options on Boeing Work

Let's look at how one week options on Boeing work starting with a Monday morning. Calls mean going up and Puts mean going down. The one week to expiring part of the equation means that what you purchase now will expire in this case on April 5th. To make any money on trading a Call or a Put contract means you would have to correctly indentify the direction the stock is going to move. Let's start by showing it's last weeks trading chart. It was actually a four day trading week because of Easter so the big spike on the chart was actually a Monday morning move. If you follow Boeing at all you will know that Monday mornings can be volatile for this stock and it's opening trading price has to reflect the impact of any positive or negative news that occured over the weekend. If a plane for example was to crash over the weekend look out! The stock would tank. Yes there is a risk in holding Boeing options over the weekend, especially a long weekend.
How do you know which way a stock is going to go? No one knows but look at lasts week's chart again. Look a how it bounced on the opening on March 27th. Anyone clever enough to be buying a Call at that time would have got a double or triple on their money in two days! That's the potential offered by short term trading. Alternatively, anyone lucky or clever enough to be purchasing a Put just as it was spiking on the Monday March 25th opening would have done wonderfully well if they got out before the closing on March 27th. Is all of this too much work or to difficult to do? Is it to much like gambling? Obviously most people would say yes. This trading world of options exists with excellent fluency and for some people with the ability to focus on charts, news releases and index swings all at the same time it can be an interesting and rerwarding reality. All from the comfort of your home. Now look at these two readouts.
First the 195 Calls and how they closed out last week. They closed at $1.81 on that day. Now here is how they are trading at 1:15 p.m. on Monday.
Now the 195 Puts. The Calls are down and the Puts are up.
Here now is what the DJI is doing.
So what kind of a comment do I now want to make? 1) Selling into strenght on a Monday morning (this didn't happen in this case) when your sitting on five day options you bought on the previous week's close is a popular strategy. 2) Look at the chart. Two previous days of nibbling to the upside. One might expect it to give up some of it's gains. Now lets look at it's current one day chart as of 1.50 p.m..
The Puts, any series of Puts is where the action is. Now a second look at the one day chart.
When a stock comes off that hard on the opening it seldom reverses that trend on the same day. Why then the high number of Calls sold on it early in the morning? It's not necessarily traders looking for a quick rebound. It's traders who already own the stock and who are now pulling in option premiums in the hopes of being able to rebuy them back at lower prices before the end of the week. It's called "covered Call" writing. Here now are how both of these two option series closed the day. First the Calls and then the Puts.
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Notice how nothing really changed in the last 2.5 hours of trading? A second printout below shows the exact same thing.
....
These options still have four days of trading life in them. Now the closing reading on Tuesday.
Look at the large spread between the bid and ask on the 195 Puts. Option makers know a strong rebound in the opening markets is very much a possiblity. Notice also that the open interest in the Puts is now down slightly. Here now is how the five day chart looks.
To be continued.

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