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 happen.
A look now at Friday's chart. Can you see how the stock popped on the opening?
Now here is how they are at 9:41a.m.. They did hit $12.00 and at 9:41 the ask went as high as $14.40. I pegged just by luck the timing of the highest trade on the day. Some people have a feel for playing Costco options and the nice thing about them is that when , they jump big.
Now here is how they closed the day.
Getting out of one day Calls in the morning on the last day they expire is the name of the game. Click the follow us button if you like this blog.
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