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Caterpillar Puts On A Friday Morning

I am getting some flack from people saying I should have called this site CatCalls and not CatPuts. Oh well, I saved money by going with name Catputs. Now this. Caterpillar closed at $647.18 on Thursday and jumped to $655.54 at 9:47 a.m. on Friday morning. Then it dropped to 641.44, the low of the day at 10:43 a.m. which was 56 minutes later. That's a massive price swing. Looking for price swings on one day options are not normal trades to be thinking about. I get that Look at how this one series of Puts reacted. Option trader as I have often mentioned are afraid to play options on Caterpillar as it defies logic and continues to go up in price. It has an earnings report coming out at 8:30 a.m. on Thursday January 29th. Try and listen to their conference call. Profits may not be as rich as some people are expecting. Input costs have risen. Now let's look at the 650.00 Puts to see how they traded on the day. So few traders attempt to trade in them. Look at the super low open i...
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McDonalds Again And A Follow Up To Yesterday's Blog.. A Continuation of The Look At One Day Options

Option traders on Friday mornings just want to be in and out in the first hour or so of trading on short term options. In the second half of the day most of the action calms down. McDonalds sold off a little bit yesterday afternoon and firmed up a bit towards the closing. Could this "mostly downward trend" continue? Here is a partial look at some of the opening bell's activity. Today is a Friday however let us first look at how the stock traded yesterday.
Now a look at it's trading pattern at 9:32.22 a.m.
The McDonald stock jumped up $4.98 and the 317.50 Puts we followed all day yesterday which are now "out-of-the-money" acted accordingly. They shrunk in value. During the fist 2.22 minutes of trading they traded down to 34 dollars a contract.
Now this. In the first three minutes of trading the stock jumped a bit and then started to come off a touch. These Call options where not attacting all that much attention. The bid and ask jumped up on little volume. The overall trend for the stock in the last couple of days is down. That's what yesterday's blog was all about.
What are the Puts doing?
Well the 320 Puts which are "in-the-money" by forty cents and would now be the ones to benefit the most if the stock was to suddenly run out of upward steam. None have traded in the first four minutes and eleven seconds of trading! They are priced somewhat defensively but no one is giving away free money. The bid and ask are wide apart making them difficult to get a favorable fill. I also know that just because a stock pops on the opening it doesn't mean that it will sustain that gain as the day goes on. A lot can happen in the next four hours or so of trading.
Now lets jump forward to 11:34 a.m.. First the chart. Can you see below the early rise and the drop in the stocks price and the new price of the 340 series of Puts? Things can swing quickly with these kind of one day options.
Back near the opening at 9:34 a.m. we saw them bid $1.51 ask $2.51. Talk about action. Now lets jump ahead to 11:59 a.m. and this is what I really want to show you. The beloved 137.50 Puts which was the centre of my attention yesterday and mentioned again in the early part of this blog. They traded down to thirty two dollars a contract when the stock was jumping up in the first two minutes. It would have taken guts to be buying into them at that point in time but the charts told us that there was a very good chance an upwards rally wouldn't be substainable.
Somewhere in the late morning's trading these Put hit $2.32 per contract!. That's what one day option trading is really all about. Catching price swings this large. What ended up happening by the end of the day? Not much. Things kind of calmed down. Here are four interesting closing readings.
It was a good Friday to go against the early morning rally. Can you see how few option traders are willing make these kinds of trades. Forget everything you read about Ai trading. This kind of trading is one step beyond that. You can afford to make a lot of mistakes trying to play these types of short term options and still come up a winner by catching the odd ten fold gain. It's not a game for everyone. Very few option websites approach this topic like this site does. Option trading like this is a real battle.

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