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Bad News On Caterpillar Going Into a Friday.

Here is how the stock traded on a Thursday.There was nothing unusual about the day. I am suprised they would dump this news on the market going into a Friday trading session. It messes up option traders. Doing this type of an announcement on a Tuesday prior to the markets opening would be a less disruptive day to do this. Here is the news. In a way this wasn't totally unexpected news. As they said, there were several other recent updates on this issue. Auto companies in their recent quarterly reports were harping on this issue. Look at how it dropped in price in the after market trading. Now here is how one series of Puts closed the day. Look at how this news totally caught the markets by suprise. The secrecy of this news is a credit to Caterpillar. If Caterpillar had this news are Deere Call holders going to get worried? Here is what happened on Friday morning. Now Deere which is now also trying to shake off this bad news. These two stocks tend to trade in similiar ways. He...
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The Sickly Feeling Of Sitting On Tesla Calls Last Thursday If You bought Them For Double The Price The Day Before.

I don't usually talk about sickly feelings as it pertains to "option trading". The 332.50 series of Tesla Calls on Thursday August 21st that were to expire the next day closed at $2.87 per contract with the stock closing at $320.11. What that means is at that time they were "out-of-the-money" by $2.39 and would end up worthless in value the next day unless Tesla jumped back upwards again. Upwards and over the 322.50 price.The 332.50 price plus another $2.39 just to break before even figuring out the commission costs. I also gave the example in a recent blog of how back at Wednesday on the close these same series of Call options were trading at $5.75 a contract after reaching an interday high of $11.30. Look at its five day trading chart to see what caused these drastic price changes.
With the bounce on Friday a $2.87 contract went as high as $17.45 from a low of $2.25 on the opening. That means a Telsa Call option priced at $225.00 on Friday morning increased in value to $1,745.00 in one day. That was an exceptional day triggered by the Federal Reserve Chair Jerome Powell crafting a speech to appease his listeners.
This event is now history and when you turn on your computer on Monday morning to study the markets looking for trading opportunities everything will have changed. "McDonalds" might be up $1.65, "Boeing" might be down $2.74 and "Ford" might be off $.12. If you messed up on your one contract Tesla trade last week your desire to try something different will have wained. The experience of paying $575.00 for one Telsa Call last week on Wednesday to then find it trading the next day at $239.00 with one trading day to go might be super upsetting especially if you then decided to sell it at a loss. You could have lost $336.00 U.S. in one day if you didn't have the guts to hold onto it until Friday. What does that amount of money equate to in your life? One month's car payment, one month of food costs or airfare to and from your favorite holiday desination? You could have used that money simply to buy one share of Tesla that you could hold onto for as long as you like. Instinctly I don't like holding one week Call options on Wednesday that expire on Friday afternoon hoping for a Thursday morning rally. The time value premiums on Wednesday's short term options can be excessive. So think about this. Two week out Call options. They would be better right? Wouldn't all that extra time be a luxury? Sorry folks, it doesn't work that way. Two week out options seldom pan out the way you want them to. In contrast, one month out or one year out options sometimes do. All I really know is that the Tesla story will never end.

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