This time we are looking at McDonalds on the close on a Monday. Monday and Tuesday "last week to expiracy" options are expensive. Numbers like $4.00 and $5.00 swirl in the air on "at-the-money" options on stocks in the $300.00 and $400.00 price range whereas on Wednesdays or Thursdays these same type of options would cost like $200.00 - $250.00. Here is McDonald's five day chart.
Now here was it's one day chart. Can you see how it dropped on this mornings opening? It's once again a Monday.
Now here is a series of "slightly-out-of-the-money" Puts that I want to focus on. "Closer-to-the-money" Puts would be better however these options trade in $1.50 increments. On a soft opening could they could likely go to like $3.00 or more on the opening in like four or five minutes? One question I have is why aren't other traders also thinking the same way?
Well $308.62 was the high on Mcdonalds five days ago and that's the concern now. The stock today was in an afternoon uptrend and it could easily jump up to and over that price point on a strong opening. The strenght inherit in a 500+ plus one day gain is difficult to ignore. But then again, if the markets gives up half of today's gains on tomorrow's opening then Mcdonald's should drop in price. Why am I calling this blog "Trying To Push To Hard To Make A Trade"? Well I would rather be part of the "fluency of an existing interday directional move" than be part an exercise of trying to outguess opening market directional moves. Most short term option players are of that mindset. Let's see what happens tomorrow. Now here is what has happened on the opening.
One contract has traded. Now this nine minutes into the trading session.
To be continued. What do you think is going to happen? Now the Puts are getting challenged as the DJIA is moving up.
Now here is where anything can happen.
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Now at 1:10 p.m. look. Things are in total limbo.
Now it's five day chart.
Is it running out of steam? Now this. Mcdonald finally broke down.
As a daytrader I would say get out and take a small profit. That's what daytrading is all about. Tuesdays going into Wednesday on one week options are not my favorite spot to be in. That plus trading volumes in the Puts are very light so the option makers I would think have an easier time holding things flat.
Let me now show you how these options closed the day.
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The last trade of $2.60 happened sometime before the 3:42 p.m. period of time. No option contracts traded on these Puts in the last forty-five minutes of trading. ***** The action the next morning.
Scary stuff which highlights the benefits of not holding onto option positions overnight.
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