Featured

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...
Post a Comment

Tuesday and Wednesdays Looking For Reversals - That's What Some Option Traders Do

What if? But who has money to throw around like water? What if the markets decided to cool it? Wednesdays are usually better days for market reversals than Tuesdays. Caterpillar and Deere both had crazy high gains over the last five trading days. Deere is up after exposing the details of declining sales. Exposing is a strange word to use but it better helps to explain the pain it is now facing. It is so confusing as to why it is up so much. Read my November 22nd, 2023 blog when Deere was pretty much in the same situation. So much forward looking thinking is baked into the the current prices of these two stocks. The question now is could the markets turn on a dime? Look at the Put prices on short term "out-of-the-money" on Caterpillar and Deere positions. The Caterpillar Puts I will first show are like ten dollars "out-of-the money" and the Deere Puts five dollars "out-of-the-money".That's a bit to far out.
Now Deere.
Both charts show a similiar trading pattern and both stocks have next to no outstanding open interest Put positions. Fighting strong charts can be the kiss of death. Yet what happens if a mild selloff hits the markets in the next few days. Are these two stocks sitting ducks? Do you have any crazy money to play with? If you own Deere or Caterpillar stock would now be a good time to cash out and take a touch of your profits and consider Puts options? Admittedly this Friday's Puts are an extreme gamble. Going forward into December traders might be thinking of lightening up on positions with the transfer of leadership coming up after Christmas. Maybe. It's only a thought. The markets will be closed Thursday Nov 28th for Thanksgiving. Trading volumes will be light on Friday. This factor might negate making a trade in "this weeks" Puts with one day of trading to go. Perhaps next weeks Puts might be the ones to be looking at. Now this. Wednesday morning. Caterpillar and Deere continue to climb. Here are the Caterpillar Puts.
Now the Deere 455 Puts.
Both got beat up because they were to far "out-of-the-money" and time is working against us.Sometimes reverals come into the market on Wednesday around noon. If we are still thinking about short term Puts on Caterpillar and Deere here are two now current readouts on the same two stocks but this time with adjusted striking prices. Both are "out-of-the-money" Puts option positions however this time not so crazily "out-of-the-money".
Let's see what happens next. Now this, Wednesday's end of day readings.
Caterpillar Puts had a nice move and Deere continues to go up. Now both their five day charts. What do you think is going to happen?
As mentioned, with a holiday on Thursday friday's action will be somewhat mutted. Both stocks ended up trading slightly up. So looking at Caterpillar only worked on Wednesday and Deere retained most of it's strenght all week. Here are their five day charts. First Caterpillar.
Now Deere.
Stay away from option positions that expire at the end of the week if Thursdays are holidays.

Comments

Post a Comment

Popular posts from this blog

Living on Kraft Dinner?

Image
What does the word disconnect mean? As a verb it means "to sever or interrupt the connection of or between; detach". Option trading - one day options - is a disconnect from the world. What happens to slightly "out-of-the-money" Call options on Costco when the stock shoot up thirty dollars on the day? I will show you what happened on Friday to Costco Calls and the options on a few other stocks I frequently watch. What a disconnect from the real world. But before that a look at how the indexes traded. 1) Costco. It's five day chart and a look at how three of it's option series moved upwards in one day. You may not know how to read these printouts but try to read the highs and lows on these option pricings. One printout shows an "at-the-money" option which means you are buying a contract on the stock, good for one day only at a locked in price equal to (or very close to) what the stock is currently trading at. The other two contracts shown are ...
Read more

The Little Engine That Could

Image
Walmart again. It's all I seem to blog about. Here is it's five day chart. The stock keeps going up and the option series are set up in one dollar spreads. Even a fifty cent move on the stock moves the needle on these Calls. Look at how this series of Calls was trading yesterday at 3:00 p.m.. Now here is this same series of Calls just before noon today. Thirty days of upward action like this punctuated by the off day of decline. Now notice the higher volume of trading in the series of Calls with the higher striking price. These are the ones's with more leverage. At the same time look at the five day chart on Costco. The two stocks sometimes trade in tandem. Humpty dumpty sat on a wall .... a had a great fall. Someday soon a fall might happen but what a great ride it has been.
Read more

A Fireside Chat - One Year Options and Thirty Day Options. Which is Better?

Image
Some say to think small, not big. Trying to play Disney options is thinking big. It is a stock slighty out of favor. If we start with it's a three year chart, we will see it is down by about 50% over that period of time. Now it's one year chart. If the stock can break 110 in early 2024 the sky is the limit. It does have a lot of moving parts so anything could happen. Look at these Calls options one year out. One year in options buys a lot of time.They look reasonable. If the stock ever inched up to the $105.00 price level in the three or four months these options would jump up in price by about 50%. Even more if they had really good news. Yet it's the "what-if" aspect of the equation that castes such a trade in doubt. "What if" stories just don't cut it. There are to many variables in play. Then again, why are we even thinking of long-term Call options after a December's rally? Let's switch gears. If consumers are out spending for X-mas...
Read more