First, Costco is down $44.79 over the last ten trading days. The company sells food and everyone needs to eat. The chart looks like it might now want to rebound. Down $44.79, it's crazy that it could sell off that much in such a relatively short period of time. What about other stocks in this price range like Netflix? Well the Netflix stock is priced at even a higher level. It's at $1,257.00 today and yesterday afternoon it was at $1,213.00. Yes, today it was up $31.30!. My point is high priced stocks can make big moves and that's what makes Call and Put options on stocks like this so potentially rewarding. Most people would never consider trading in Costco options. I get that. More on that later. Now back to Costco doing so poorly as of late.
It's now Thursday morning before the markets are open and here is a look at it's "at-money" Calls and Puts. Notice the light volume of the "open interest'. The two numbers reported here are 480 and 358. When you factor in that most traders doing this trade 5, 10 or 25 contracts at a time. What this really tells us is that there is really no one on the planet willing to trade options in this space. Also factor in that each and everyone of these traders have a different slant on what is happening and a different style of trading. At this stage of the game as I will soon show you it often just becomes an exercise of just watching the charts.
Now here is it's five day chart.
We missed it. Yesterday's Calls is where the action was.This is a stock that can surge up $30.00 in one or two days and sometimes does. Let's play nurse to this stock and see what the Calls and Puts we are watching on a Thursday that expire tomorrow are doing twenty five minutes into trading session. The Calls are up 55% and the Puts are down 47%. It could be said that only reckless money would be purchasing Calls on yesterday's closing given that it closed so strong. Reckless but perhaps smart money. When trading option contracts in this price range gains or losses of like 50 % in only a few hours are the norm.
Now what do you think when you see this chart at 10:10 a.m.? Is something tugging at you saying it should trade downwards? Look at how it struggled so much in the last few days. It's hard to know what to think and if you lose money on such an obscure situation you would have no one to blame except yourself. Once again we are still in Thursday.
Shown above is how the Calls traded upwards after the opening. Up was the way to play it. What happened during the second half of the day? Well when it was all over the Calls were up 50% and the Puts where down 50%
Now it's five day chart which also includes today's trading, a Thursday. Daytraders near the end of the week need to learn how to keey their days straight.
Friday will be a new day. It's now Friday. This is where the real action will happen . Will the small little fish be able to catch the big fish off guard and beat them in their own game? That could happen if there is some sort of a reversal in the day. Now a look at the premarkets around 9:20 a.m. Costco is up again.
It's up over $4.00 in the first two minutes of trading.
Here are the 950 Calls and Puts at 9:38.00 a.m..
To put all of this into perspective these Calls were trading at $595.00 yesterday morning and the Puts at $630:00. Let's see what happens. A 10:20 a.m. update. Costco is crazy up. It's up another $8.41 in 40 minutes of trading. Look at these three series of Puts. Why aren't traders attracted to them? Where is all the crazy money looking for good deals? Could this be a good entry point - is the stock topping out? Is now a turning point?
Now this sixteen minutes later.
These Puts were $1.55 sixteen minutes earlier! The same is also true for the 962.50 Puts, once trading at $.82 are at $2.55! When we last looked at them they were actually at this low point of the day. I nailed the timing of this swing to the exact moment in time! Look what they traded up to.
I forgot to track the 967.50 Puts however they exploded up in a similiar fashion. What action in the first 90 minutes of trading!
Now another look at the same three series of Puts 40 minutes later. They are still climbing in price!
Suprisingly there are next to no new Put option positions opening up. As a recap, here is what just happened in the first two hours of trading.
Put players had a chance to get lucky this time.*** Towards the end of the day Costco turned back up again.
The 967.50 Puts at 3:22 p.m., which is just past the Friday deadline to get out were bid $3.35-ask $4.35. with no trades since their high of the day.
Costco closed up $7.58 on the day and Netflix was down $13.66.
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