CAT Puts

Disney jumps on the opening and it's Put options deserve observation. Monday mornings can be periods of excess exuberance. Now this. Now this. And now this, a higher prices Put. Now this an hour or so later. Now all three Puts at 11:18 a.m. The 111 Puts which were slightly out of the money went from $1.10 to $1.78. Now the 110 puts which were deeper out of the money. They went from $.72 to $1.25. Finally the 112 Puts, the ones that were already "in-the-money". They went from $1.53 to $2.55. Was there any news? Not really. Don't be afraid to play in Monday morning options.

If your a frequent option trader making 25 trades a week you will say that everything I am about to say is totally useless. My five points mentioned below are for the "everyday traders" who who have their favorite stocks to play options on. 1) Placing option tickets on Monday or Tuesday morning that expire at the end of the week. Don't do it. The premiums tend to be expensive. 2) Don't find yourself in a postion of sitting on five contracts on let's say Disney to go down in price before Friday, five contracts on Boeing to go up in price and a couple of option positions on two different oil stocks. Time value will beat you up and you will probably get them all wrong. 3) Avoid in general one week options on stocks priced in the $20.00 and $30.00 range. Options on stocks in the $200.00 or higher price range have a feeling of moving more and for that reason tend to be a better play. 4) Avoid buying options in the last eight seconds of Thursdays close, looking for a ...

Caterpillar rallied from $801.53 at 3:00 p.m. on Thursday to $815.39 at 3;59 p.m. Thats a big move in 60 minutes. Institutional buying was kicking in after a rough week of trading. Look at how they were once trading over $875.00. Might it still have some room to go up? Here is how one series of it's Call options closed on Thursday. What I find strange is that no one was trading them on that day, even as it was surging upwards in price in the last hour of trading. Will this enthusiasm carry over into Friday mornings trading action? Trading Caterpillar options as of late has become a bit difficult because the option premiums have become ridiculously expensive. They closed at $6.95 on Thursday. Let's see how they open on Friday morning. Now this. A double. Why didn't any technical traders buy into this one?

First here is Ford's Five Day Chart. Now a look at two series of it's Calls, one that expires this Friday (today is a Monday) and one series that expires the following Friday. .... Notice the open interest in this weeks Calls are a lot greater than the open interest in next weeks Calls. Short term option players usually don't think two weeks out. Now imagine purchasing ten of next weeks Call at $.40 each or $400.00 and selling against them ten of this weeks Calls for $.31 each or $310.00. Your net investment would be $90.00 plus the commissions on two trades. In a perfect world you would then like to see the near term Calls drop to zero and expire worthless and then have Ford next week out Call options shoot back up again in price on the following week. It doesn't have to play itself out like this to make money. Now an August 19th review which happens to be a Wednesday. These short term Calls have jumped from $.40 to $.52. Now a Thursday suprise. Ford falls big time ...

There was news and the stock is going to jump big time on the opening. Now look at the volume of trading in two of it's series of Calls yesterday. What impresses me is the zero trading activity. Insiders are not catching this action. Now look at it's premarket bid and ask. Now this eight minutes into the trading action. ... Look at the price increases. $.08 or eight dollars a contract to over sixty five dollars! Let that sink in. More comments about this to follow. Here is it's chart two days later. Playing the downside on yesterday's opening would have also produced great returns.

First it's one and thirty day charts. It's Tuesday and we are now going to look at the "in-the-money" 27.5 series of Puts that expire on Friday. A drop in the stock's price of $.50 would do wonders for these Puts. Company insiders are said to be buying shares in this company. The stock has being going sideways for a year. Now it's one day chart early at 9:56 a.m.. To jump this much in the first 30 minutes of trading is a rare occurance. Notice how low they traded down to (between 9:59 a.m. and 10:03 a.m.) in this spike upwards. Now this. A swing from $.32 to $.48. If your trading ten contracts at a time you could have caught some of this action and had the fun of doing this. * Here is how they closed the day. Yes you can pay the downside on unusual morning bounces but you have to be nibble in your trading and detached from this action after you sell out. Take any profit when you see them and just get out. Tuesdays after the close is my least favorite d...