Featured

How To Avoid Time Value Traps With Last Week Options.

This blog is not going to be an exhausting study of this topic. I just want to show you a few charts found in recent blogs and comment on which ones seem to skirt the issue of "time-value-concerns' and which ones don't. 1) Avoid Thursday at the close Call options. In this case Thursday is the second last day of the above chart. If you guess the wrong direction on the close it's going to be game over on Friday when the options expire. Thursday at the close on options that expire the next day are the biggest time value traps you can buy into. If the stock moves in the wrong direction it's game over. 2) Ford on a Monday going into Tuesday. On this chart April 13th is a Monday and Tuesday is the 14th. Can you see Ford closing strong on the close of the 13th? It would make sense to get in on the stong closing because these Calls would still have four trading days to recover if Tuesdays opening was not all that spectacular. 3) This time it's Caterpillar and it...
Post a Comment

The DJIA Index Down over 900 Points With An Hour Left In the Trading Session.

If it wss down 600 points at this time in the trading session and not down over 900 points you might expect to see a slight rebound in the final half hour of today's trading. That doesn't seem to be the case. The over 900 point drop in the indexes adds an element of scare. Now Caterpillar which is down over $19.00 on the day. Would this be a good time to catch it for a rebound? Is has being a particularly strong stock as of late. Might it be one of the first stocks to rebound after today's train wreck of a day?
Look at the 625 Calls that expire at the end of the week. Only five contracts have traded on the day. Traders are not rushing to buy back into it looking for a strong close. Yet they are more interested in the Call options on it about ten dollars "out-of-the-money". They cost less but will be slightly less sensitive to only a one or two dollar rebound. They need more of a bounce in the stock's price. Here they are.
Now here is Caterpillars one day chart as of 3:30 p.m.
The stock is creeping up as the index appears somewhat steadfast in it's ways.
Now these two readings at 3:32 and 3:34 p.m..
...
In the last 25 minutes or so only one contract traded in the lower series of Calls and only ten contracts traded in the "higher-out" series of Calls. At 3:42 /3:43 p.m. the action continues.
....
Let's come back to the action around 3:58 p.m..
Here is Caterpillar's one day trading chart.
$9.28 to $11.00. It's not much of a trade but the results are in line with what one would expect. The risk of staying in this position is that the markets could drop again on tomorow's opening. In these kinds of markets it's best not to be holding "last-week-to-expirying-options" overnight. *** If you had the guts to stay in overnight here is how the 635 Calls are trading on Wednesday morning.
There was a bit of a jump on the opening but it's still early in the day. Now this just over an hour later..
To be continued.

Comments

Post a Comment

Popular posts from this blog

Waiting For A Drop On The Opening On Bad News - Eli Lilly

Image
Here is the bad news. The company is Eli Lilly. How bad is this news? Well look at it trading in the premarkets. So what do I think? I think the news is a setback of sorts, but not really all that bad. The stock is going to open lower, that's a given. It's like trying to play Boeing after an announcement that an airplane has crashed. So the stock is going to crash and it might have a small rebound and then it's going to slide down some more. A test of sorts will happen sometime in the afternoon. It might stock falling but then where will it go from there? The best case scenario is a recognition that investors got it all wrong and the stock ends up flat on the day. Yet there might be more of a downward dumping of the stock on the close followed by a selloff on tomorrows opening. Should option players be jumping in to play the upside on next week's Calls? That is the question. Here is a look at Boeing on the days after a crash. Day two after the crash was equally as ...
Read more

A Fireside Chat - One Year Options and Thirty Day Options. Which is Better?

Image
Some say to think small, not big. Trying to play Disney options is thinking big. It is a stock slightly out of favor. If we start with it's a three year chart, we will see it is down by about 50% over that period of time. Now it's one year chart. If the stock can break 110 in early 2024 the sky is the limit. It does have a lot of moving parts so anything could happen. Look at these Calls options one year out. One year in options buys a lot of time.They look reasonable. If the stock ever inched up to the $105.00 price level in the three or four months these options would jump up in price by about 50%. Even more if they had really good news. Yet it's the "what-if" aspect of the equation that castes such a trade in doubt. "What if" stories just don't cut it. There are to many variables in play. Then again, why are we even thinking of long-term Call options after a December's rally? Let's switch gears. If consumers are out spending for X-ma...
Read more

News on Polestar , Lucid (Trading After A Reverse Stock Split) Plus Ford News And Vinfast

Image
Look at the one year chart on Polester. Now it's one month chart. What's going on? It's confusing. It was down $.36 cents on the week. If you want you can spend $.20 or $.25 on Puts and hope that the company goes under in the next five or six months. They recently raised more money by releasing more shares so it's running out of options. You can't run at a loss forever and this news will most likely scare off potential new car buyers. This actually is a low number of outstanding Put options. The consensus seems to be that it is not game over yet. Lucid started trading this week on a "one-for-ten" reverse stock split. Here is its one week chart. It was down $1.39 on the week. It's also going to struggle. Both of these stocks have challenges ahead. On a more positive note here is a chart that looks kind of perky. Ford on the week. The stock was down $.03 cents on the week and it was the 3th highest in share volume trading on the NYSE. It appears...
Read more