Caterpillar And Deere Calls And Puts Have Become Octopuses

Traders are now afraid to them and rightly so. Look at how low the open interest in the Calls and Puts are going into todays trading session.

It's the same thing. Open interest numbbers of 50 and 72. Now this. A look at the Deere options.

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Open interest numbers of only 71 in the Call options and only 20 in the Puts. Now their five day charts.

Note the $20.00 drop in Deere in one day. With all this information we can now move forward. Look at how the Call options traded on these two stocks on Wednesdays morning. After looking at them a few comments can be made.

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These initial gains of 46% and 21% are somewhat impressive. As the morning progressed the gains only got larger. Let's now look at the Caterpillar Call options at 12:49 p.m. The stock is up $9.68 and the Call option are now up over 80%.

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While this gain is somewhat impressive these numbers have to be weighted by other concerns. Let me list three concerns. 1) The matter liquidity and more specifically the spreads between the "bids-and-asks". With a rising gain of over $9.00 dollars in a few hours the needle on these Calls have to go up. That's not a concern. The real concern is what happens when the stock starts to go sideways? Traders get trapped in a suddenly created new world of very wide "bids-and-asks". It's more of a concern the closer to the remaining two days before they expire. Forget trying to split the middle between the bid and ask if you want to get out. You might be stuck getting just the bid on a sell ticket. 2) The lack of ongoing chatter on both of these companies. At least with a stock like McDonald's there are always heated debates over issues as simple as the value of their product offerings on their menus. With Caterpillar and Deere it's a different story. It gets even more confusing when their quarterly income reports come out when company CFO come out with carefully crafted statements purposely designed to downplay any concerns. That's what they get paid for. 3) Why are the swings in the stock prices of both of these companies so pronounced in the last thirty days compared to other periods of time. I don't know. That's a new concern.What I do know however is the the risk factor in all of these options is over the moon. Get burnt once or twice trying to play them and you will never try it again. To be continued.