CAT Puts

It's chart. It's Tuesday morning and the stock Deere has being going sideways for a few trading sessions. Let's now focus on the "bid and ask". Look at the spread and think back to the "bid-and-ask" on the stock Walmart I wrote about yesterday. The spread (the "bid and ask") on options on Walmart yesterday was like two pennies ( "bid $1.04-ask $1.06") at 10:09 a.m. which can be a very turbulent period of time. It's late in the morning trading session well past the first hour of morning jitters. If you want to buy in on Deere Calls what would you be willing offer? $3.50.? That's only a guess. If you want to sell what would be the suggested selling price? This wide spread (a spread of $3.26 dollars) is a total turnoff. Now this. A look at the trading action near the end of the day on this same options postion. Here are it's one day and five day charts. The markets are off and the stock Deere now is up. Now the same 440 s...

Let's set the stage. A five day chart and the current bid and ask on an "in-the-money" Call option by $.31 cents. Notice the tight bid and ask. That's a good thing. Now this morning's early trading. Light open interest in this series and light to moderate morning trading in these series on the opening. Would I want to hold onto a position like this for the entire week? It's kind of dangerous because at any moment an analysis could come out with a comment about "Christmas Retail Sales". It's something I would get into with the hopes of getting out of on the day. Imagine, people living south of the border that can find brokerages that don't charge fees on trading. In that environment nimble option traders can have a heyday playing options like this with a tight "bid-and-ask". Let's watch this one for a day and see what happens. Now this. Thirty nine minutes later the stock is up twenty-two cents. What's nice about five day...

Let's start with the price of the 200 Calls at 9:37:38 a.m. on Thursday morning. Only four contracts traded. These are Call options that will trade all day Thursday and all day Friday. That's about 12.5 hours of trading time. You can buy in and sell out whenever you want during the trading hours the markets are open or in the premarkets on Friday morning. Premarket trading show no bids or asks. At $206.00 a contract (that's what the last option contract traded for at this time) they were still expensive. Now a look at the same options on Friday morning at about the same time in the morning. The stock is up slightly but the Call options are down in price because half of the life of the Calls have disappeared. They are trading at $1.30. Thats a good example of why "two-day-out-to-expiracy" Call options can be expensive to hold onto overnight going into Friday's morning action. Also look at how far apart the bids and asks are. Why is this? Options makers are ta...

Let's continue with a printout showing how the 170 Calls that expire today closed yesterday on Thursday. Stocks in this price range are known to fluctuate two or three dollars in one day. In yesterday's blog I said "I don't like it's sideways moving action. To me it doesn't inspire a Friday morning bounce." So here we are today and look at this early morning action. So the stock is down 26 cents four minutes after the opening. No big deal. It's not big enough of a decline to make you want to jump and to catch a reversal. Had it quickly dropped two dollars and the Call options dropped to fifty or sixty cents then a wave of bargain hunters would be jumping in. In the next printout it is down slightly more. The above five chart shows this sideways action I talked about. Now this, a sudden dip at 9:48:00 a.m. and the 170 Calls become toast. The 170 Call options drop sharply in price. That's why holding a 170 Call bought at Thursday at the close ...

The 172.50 series of options on this stock will expire tomorrrow. Today is a Thursday. The first printout shows a bit of a struggle on the opening in the first nine minutes of trading and a return to price it closed at in the previous session. (It did have a nice rally on the previous day then to only give it up). Could it rally again this morning? Now the second printout below the following paragraph shows the high volume of trading pouring into this series of Calls just after the opening. These high volumes of trading shown below happened in the five minutes and twenty one seconds of the trading session. Traders bought in on a slight dip looking for a reversal. Good for them. Are these traders hoping to be out at a profit in the next fifteen or thirty minutes? Yes. Get in and get out. Catch a profit as the stock is deciding which way it will go. It's early in the morning trading session and the volume of trading is always the highest in the first and in the last hour of trading....