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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 ...
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Remember Moderna?

Here is it's year to date chart. Look at the volume of trading coming into it towards the end of November.
Now it's five day chart.
What do I know about this stock that other traders know about this stock that might cause it to go up? Well nothing really. It's next earnings report does not come out until February 2025.
Look at this series of Call options near the stock's current selling price that expire this Friday. That's two trading days away. It's Wednesday morning, the one day of the week you sometimes see market reversals. This series of Call options could be hot potatoes.
Now here they are thirty one minutes later.
Now another seventeen minutes later.
These options still have 2.5 trading days of action in them. Anything could happen. Look at how Eli Lilly is trading on the day. It's up $22.00 at this point in time.There is no negativity today surrounding stocks in this segment of the market.
Yet anything could happen. 1:19 p.m. trouble. Things are stalling out.
Now at 1:27 p.m. things start to drop.
Here is how they closed out the day.
Now this, the activity on Thursday morning.
A nice jump upwards with the DJIA moving down.
Look at the high of $1.35 which is more that double the closing price of $.60 and above the bid-ask of $.80-$.95 when we first started this exercise. One question is would you have the stomach to play ten contracts on a situation like this? As a general rule one has to be more nimble playing options on $40.00 stocks that options on higher priced stocks like Tesla where the stakes are higher, as are the rewards. Here for example is this mornings action on Tesla and a look at how an "out-of-the-money" Call option reacted.
Yet the question then becomes the one of how do you know this was going to be the day that this breakout occurred? If you look at it's chart you will see that it did nothing in the last three days. Now back to Moderna. Good news! It's 12:30 p.m. on Thursday.
If you where holding these Calls how would you play them? One crazy way is to say now might be to say take some of your profits and play it the other.
If your doing it with profits is that wise? Should you be just chilling out and saying thank you, your trading activites for the week are over? Here is what one series of tommorrows Puts look like. Some traders got in closer to the $.20 mark and can already take their profits. Timing is everything.
Here is how these two Moderna option series closed out Thursday. First the Calls.
Now the puts.
Now Moderna's one day chart.
Moderna is known to suprise. Now Friday morning action.
What a happy ending for Call holders.
Look at the high of $4.40 on the day!

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