CAT Puts

Look at this printout. Almost every stock on this list was totaly flat. Tesla up fifteen cents. Do you know how seldom this happens? It never does. Yet it happened today. Now this, a chart of how Telsa traded on the day. Look at the three hour price swing between 11:00 a.m. and 2:00 p.m. Now this. The 30 day out Call options on Tesla. Now the thirty day out Put options. They mimic the same kind of price swings. Intraday price swings of $7.20 and $6.97 on these two series of options. So why is this important? Watching thirty day out options is increasingly becoming a smarter way of churning out profits. In these examples one is putting out sums of money like $2,000.00 U.S. with the expections of daily returns, well in this case about $700.00. I know what you might be thinking. You might be thinking that the risk/reward aspect of the equation doesn't make sense. In response to those concerns I would say employing this strategy works best for traders already engaged in trading ot...

It went up on a earning report. I talked about that in a recent blog. Now this. Traders are not getting excited about this opportunity of playing the downside. Analysis are all busy extolling the virtues of playing it's upside. $100.oo dollars a share many are now saying.Now this less than an hour later. With the D.J.I.A. down 221 points you don't know if it's going to continue on and drop 600 points. When you play G.M. Puts you have to get in and out as quickly as you can. The reason for looking at it this time is because the indexes were looking pretty ugly. ** Here is how they closed the day.

Let's start with a printout of differing expiracy dates. That's something I never pointed out before. Most stocks are not set up to trade this way. In theory this gives you more versatility in playing short term options on any particular stock which offers this feature. You can for example buy a Call option on Nvidia which expires on Friday and sell one that expires before that on Wednesday in the hopes that the stock dips on Tuesday and Wednesday and recovers on Thursday and Friday. What does this mean? Well purchase for example a Friday's Call for $4.30. Then sell this Call shown below for $3.20. How much will this cost you? Well $430.00 goes out of your account (plus the commission) to cover the cost of the longer term option and $ 3.20 (less the commission) is credited into your account for selling the shorter term Call (which has the same striking price and which you hope sells off in price) for a net difference of $110.00 plus the two commissions. Now it's five...

Last Friday we showed how one series of options traded on that day. Caterpillar was up $21.96 on that day. The Call options jumped $6.91 or 46.96 %. Only 13 contracts traded on the day. Today Monday was not much different. Caterpillar jumped upwards on the day. The same series of Call options, the 665 Calls with the same striking price jumped again (only on one contract) and closed the day bid $37.95 - ask- $40.40. It helped that the DJIA also jumped up. Now here is it's five day chart. All this on no real news except the focus on the angle that it makes power generators which are in demand. So Caterpillar is up over $50.00 in only two days. What to do? Buy these short term Puts that expire this Friday? Fighting strong stocks at the start of the week using "close-to-expiring" options is a major risk to take with so many stocks now trading comfortably in nose bleeding territories. Now this. It's one month chart. Trading volumes are up. When stocks get hot like...

Carvana has a dubious reputation it can't shake. Insider stock manipulation or something like that. That's old news and now there are more new fears over their accounting procedures and with that comes stock volatitity. You Tube videos also talk about this situation. Here is it's five day chart and here is how their "two-day-until-expiring" Call and Put options are positioned going into tomorrows (Thursday's) trading session. .... Both are crazy expensive however they do offer two days of trading activity. That's a long time for options on a stock like Carvana. Look at the dip and the rebound it had on Wednesday. Now I am jumping ahead to Friday, the final day of trading on these two series of options. Look at this. First a five day chart showing Thursdays and Friday's action. Now it's Friday only chart. So what's important about this one day chart? This. Look at how it's Calls options traded. The Call holders lost all their mon...

So if you like the stock Caterpillar and want to play the upside on it using options you could buy these ones. But why would you? They are up 46% on the day so the real money was made in buying them yesterday and selling them today. The stock would now have to go up about $25.00 in one month just to break even and everything above that price would be profits. If you now look at a thirty day chart you will see that's what it did last month. These are "one month-out" options which are ten dollars "in-the-money" and they trade in a different fashion than short term options. Yet that not what I want to talk about. I note that only 13 contracts traded on this series on the day and the open interest in them stands at only 11. What does this tell us? 1) It tells us that professional money managers are totally lacking in their understandings of the dynamics of option trading. 2) It tells us that retails traders are to some degree misguided by the learning materials ma...