The markets are shrugging off last week's big drop on Friday. As of late the markets have always seemed to have come back up again. Now a snapshot view of three different companies at lunch time on Wednesday. All are in strong upticks. Fighting strong stocks is a recipe for failure. Or is it? It will be interesting to see what happens.
1)
Trumph is busy changing the prices on drugs and other things. Most stocks in this sector have rallied over the last week or two. Only six contracts of Puts traded in the first half of the day on the "at-the-money" options on a morning the stock has jumped upwards almost fifteen dollars. There is a reason for this small number. Given the recent volatity of the markets in the last three or four sessions, traders are less willing to dabble in Put positions on individual stocks trading in uptrends. Caterpillar for example such a stock. It's up $42.00 in three days and traders are afraid to play it on the downside.
2) Walmart.
What do you think is happening with this stock? It has jumped over $8.00 in two trading sessions. Walmart as of late is having a nice run upwards.
I want to explain the open interest number and the volume of trading number. An army of traders trade these Walmart options interday and tend to shy away from the opportunity of holding option positions overnight. They must do this for a reason. Tracking and trading interday moves has become a bit of a game of cat and mouse. You can almost play them everyday and make up as you go your own reasons as to why it works. It's now 12:07 p.m. and the Puts are trading at $1.05. Here is how they closed the day.
When you're playing rising stocks these kind of results can happen.
3) Carvana. This stock has a widely know history of being manipulated.
Some traders are willing to trade these options knowing there is an a volatility component with them which offers the chances for quick rewards. Nimble traders can be rewarded. All three of these positions are Puts. Let's watch this action. Puts in a rising market. How dumb is that? It's now Thursday morning. Watch what happened to Walmart on the opening. It drops.
Nimble traders may have caught this. Eli Lilly also had the same kind of dip ($7.00 to $8.50) before it started to charge up again.
Carvana opened strong and didn't offer a morning dip.
Traders are trained in these markets to buy on the dips and are usually afforded this luxury minutes after each morning's openings.
Now watch for Thursday's action to unfold. It's not going to be what you might expect.
Here is where playing the downside on all of these high flying stocks paid off. 1) Let's start with the $822.50 Puts on Eli Lilly. Yesterday they closed at $7.00. Today Thursday they closed at $8.28. Not much of a gain there.
2) The Walmart 109 Puts. Yesterday they closed at $1.05. Today they closed at $2.52! The stock was down $2.56 on the day.
3) Carvana . Down $10.94.
Yesterday the $355.00 Puts cloed at $6.06. Today they closed at $12.57.
The markets were down on the day.
Yes you can play short term Puts in rising markets.
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