Featured

Costco On A Monday And What Happens After That.

 The one day chart looks compelling. It's of Costco at the start of this week. Compelling that is to be looking for a rebound. But then again the volume of trading is low so that is not likely going to happen. Costco is the kind of stock you always have to watch but rarely get involved with when it comes to option  trading.. People are always going to be buying food and Costco operates at the top of the food chain.

The Puts as of 2:20 p.m. as shown below have jumped in price. Notice as also shown below the low trading value in this series of Calls. It's an upday on the markets in general.
     Is this a good chart formation to be looking at for a reversal? Some days Costco drops fifty dollars in one day. Let's look at the 990 series of Calls. It's  now 2:21:00 p.m. on a Monday. Could they rebound?
 
 Here is how they closed the day at 4:00 p.m.. They are down another $2.86 from where it was trading at back at 2:00 p.m.. The fact that the DJIA is strong hasn't affected this stock's performance.
Buying into a downward moving trend looking for an uptrend is never an exacting science. Tomorrow will be a totally new trading day. Here is how the 990 Calls closed the trading session. Not many traders jumped into these Calls in the last two hours of trading. That's because it's a Monday and five day options  have built into their pricings a certain element of time value. Buying into Costco on the close on a Wednesday or Thursday, while extremely risky offers a better bang for your buck if you do catch a reversal. That's because the time value premium built into them will be lower.
Here now is it's five day chart which doesn't look good.
Now to jump ahead to the opening markets on Wednesday morning. I note that tomorrow (a Thursday) the markets will be closed for a holiday. Here now is it's five day chart and a look at how the 990 series of Calls are trading.
The stock never reversed back up.
These Calls are now more than ten dollars "out-of-the-money" and less than half the price they were trading at when we last looked at them. They dropped 19.70% on the opening even though the stock held steady. That loss is attributable to the time value premium built into the option's pricing having dissipated. Now there is a new reality to deal with. It's that he volume of option trading will be much lighter than usual today. Jumping from a Wednesday to a Friday means that you only have once chance to correctly identify which way the markets are going to go on Friday morning. Guess the wrong direction and you lose.  Most short term option players don't want to play that game and will sit out all of this action until next week when  things resume to a more  normal state.. 

Here is how once again Costco closed on Wednesday with Thursday being a holiday. Can you see how it dropped $2.00 in the last couple of minutes?

Might it move up tomorrow? There is war news happening.
Here is a look at slightly out of the money "Calls" which also expires tomorrow. It would take guts to be holding these.
If you really have guts these are the Calls ten dollars "out-of-the-money" which might drop on the opening with a two dollar selloff only then to rally back up if the stock then jumps five or six dollars just after that..
In some respects these options are playable if bought somewhere like 30 minutes into the opening action. Let's see what happens. Strange things often happpen.

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