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Why The Appeal Of Trading Caterpillar Options Is Now Diminishing

In previous blogs I looked at Caterpillar spiking upwards through the $1,000.00 barrier for the very first time. Twenty and thirty and forty dollar daily jumps on the stock were the norm. Today we are entering more sobering times. Pundits are now commenting on the upcoming release on August 4th of Caterpillar's quarterly earning report. That is not far away. The stock has doubled in price in a relatively short period of time. Is the party over? Look at Caterpillars one year chart. The companies earnings have not doubled in the last year. Far from it. So now what? Buy a Put option thirty days out in the hopes the stock might drop ten percent on a more normalized earning's report? Maybe. Here is an example of the cost of what one of these Puts would look like. Given it's current bid and ask the stock would have to drop to the $1,005.00 just to break even. It could, however most active option day traders are seeking opportunities which can play out in hours or in a day. Case...
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What Happened to Options On Tesla With Two Days To Go And An Earnings Report

First it's five day chart going into a Thursday. It closed at $438.97 on Wednesday. Something else was happening on wednesday. It's quarterly earnings report were coming out after the markets closed. This factor means that both the Calls and Puts were priced higher than they usually would be.
The 440 Calls going into the opening closed at $14.30 on wednesday's close and the offsetting Puts with the same striking price closed at $15.37.
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So the $14.30 for the Calls means $1,430.00 U.S. dollars which equals about $2,000 Canadian. Just to break even the stock would have to close at $454.30 which would be a huge leap upwards. It could. As stated in a past blog on two of the last three Fridays Tesla has had an interday price swing of over $30.00 dollars. Let's watch it and see what happens. So really the "small fish" meaning the little guys like us can't be sloshing money around and holding onto contracts like this overnight. But wait. It's the swings that one should be watching and opportunities will be presenting themselves interday. Here is how both the Calls and the Puts traded and closed the day. The Puts jumped up $12.00 on the opening and the Calls got crushed and later rebounded.
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How did this all happen? Well here is it's one day chart.
Now here is the highly anticipated earning report news.
Initially the stock crashed on the opening on this report. Then,something that was bad suddenly switched to being good. That was the time to be getting in on the upside. Look at these interday highs and lows.
Tesla options are best played interday. Now congratulate yourself if you got through reading this blog. There was a lot to digest and this was one of the most action packed days I have witnessed on this stock in a very long time. Tesla options often suprise. In some ways I understand why some option players make Tesla their number one stock to play options on. Friday's action was also a suprise.
Put option players who got in after the opening bell are the ones who got lucky. Look at how the 450 series of Puts traded on the day. As stated before, catching "last-day-to-expiring-Friday" Tesla options going in the right direction between let's say 1:00 p.m. and 3:00 p.m. is often a good strategy.

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