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A "Love-Hate" Relationship With Pfizer Options

Pfizer options often disappoint however there are times when they can be your best friend. Let me try and explain. First look at it's five day chart. The 24.50 series of Calls have more than doubled in price in two days. Volatile stocks like this in this price range attract an inordinate amount of attention when it comes to option trading and it only flares up during these brief periods when the stock has these extreme price moves. Look at the open interest in this one series of Calls below. It's quite substantial. Now for a simple calculation. If the stock moves up today to $25.00 these $.37 cent options on the 24.50 series of options will probably move up to the $.55 cent range. Buy and sell let's say a block of 25 contracts and you will be rewarded with a nice gain. Now let we share this one observation. Here is a look at how the D.J.I.A. traded yesterday. It was down. Who wants to be holding short term Call options overnight if the markets are souring? Wouldn't t...
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Why The Appeal Of Trading Caterpillar Call 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 in point is this "on-the-cusp" of being "in-the-money" Puts which expire on July 3th. Notice the open interest going into today's trading.
Needed now is a drop of about $13.00 just to break even. A smaller drop would also help these Puts if it happened this afternoon or on tomorrow's opening. Stocks reaching and breaking through the $1,000 dollar range can often have explosive one day upper spikes. I captured that action last week. We are beyond that stage now. Let's see what happens. Now this.
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$13.75 went to $66.25. Caterpillar Puts can sometimes suprise. Now a Friday morning update. This series of calls has now ended. $13.75 to $73.00!
Let's see what happens when their earnings report comes out.

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