Trading Options Is Not As Easy As It Looks
Let's start with the two following comments. The trading platform for trading options is already there and it offers instant access to a world of opportunities which are near limitless. That plus commission fees are coming down. Do you have reasons to believe that the solar power industry is beat up and on the verge of getting a new lease on life? Trumph has bashed that industry over the last few years. If so why not buy six month out Calls on First Solar and other solar companies? I think that the company Stellantis might sort itself out, not because of the products they build in North America but because of their interwined relationships with both European and now Chinese car brands. It has dropped over 50% in one year. I like it's one year out Call options. Does your brother work for a small pharmaceutical company and is he privy to exciting things soon to happen? Get in, buy their Call options. In the last week oil prices tumbled. Share prices of the big U.S. oil companies eased as the tensions in the Middle East dropped as people started to realize Trumph is losing some of his power. The last week to expiring "Put" options on many U.S. oil companies doubled in price. Were you intuitive enough to see this happening? Having said all this there are caveats to consider. For example, last week the stock Mcdonalds released what I considered to be bland quarterly earnings report. I blogged about this event. So the stock jumped on the opening. Wouldn't this be a good time to jump into it's Puts which expire just a couple of days away? Here is the action two minutes into the opening and twenty three minutes into the opening..
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Let me try and explain what we are looking at. Traders who jumped in early to catch the downside made a big mistake. At 9:53 a.m. the Puts with a striking of $275.00 which where to expire at the end of the week were trading at $2.30. The stock was up $7.44 in the first thee minutes of trading. This number is 69.74% from the previous day's closing price! They looked to be a bargain if you believed the stock was about to drop. Yet that didn't prove to be the case. The stock kept going up. The D.J.I.A. was exploding upwards. As you can see from the above printout above the 275 series of Puts only a few minnutes later offered so much better value. Now here is Mcdoanalds five day chart.
Both series we have discussed ended up expiring worthless at the end of the week however the $275.00 Puts did hit a high of $5.80 on the day.
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One might walk away after reading all of this with a distain for getting involved in any of this type of action. I get that. Let me make note however of my Thursdsy blog on Mcdonalds which highlights a movement in the $277.50 series of it's Puts from $1.45 per contract at 9:48 a.m. to $260.00 dollars per contract at 1:58 p.m. I can't make this kind of stuff up. I know that reading blogs like this can be taxing yet if you want to get your head around the concept and relavency of option trading this kind of commentary could be of value.
