Caterpillar And The Power Of Monday Morning Resets.

Caterpilllar options are difficult to play because the premiums are so expensive. Everyone knows that. Options players know that Monday mornings can witness market resets. That's what happened this morning. Look at how these eight dollar "slightly-the-money" Puts closed the week on Friday. Do you see the number $15.51? That's one thousand five hundred and fifty one dollars a contract. That's chunk of money.

Look now at it's five day chart. Can you see how it might drop. Yes we are talking about putting up a large chunk of money to buy one contract but look at how this plays itself out.

Now this. It's Put action on the opening.

There is kind of a delayed reaction in the Puts. No trading in the first minute of trading.

Now this.

That's a huge drop. $4,300 is now the value of these Puts, up from $1,551.00. Might it rebound back up from this level and would such a move be playable? Who would even want to try? We are still only nine minutes into the trading action and we have seemed to have found the bottom. Notice these are calls with a lower striking price than what we were first looking at.

Now this at 11:00a.m.

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It's scary times. Traders do not want to trade these Call options back up. I understand that. Caterpillar options sometimes have gapping holes in them. Trading them is a game of knowing when to pounce. This morning was one of those rare occasions.