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A Random Walk In The Park On A Monday Morning. A Caution. Monday Mornings Are Often Not An Option Players Best Friend

Let's start with this. It's now 10:26 a.m. A bet on Caterpillar rebounding by the end of the week. There are no takers. Why have to watch the screen for the next four days in agony waiting for a rebound which if happens is just a "break even trade"? But Wait. I made a mistake. The market is actually now down 668 points. What else can we look at? Interactive Brokers. These kind of stocks always do poorly on days with the threat of margin calls. Yet there is something interesting about the printout I am about to show. It is that these options are "one-month-out" Calls. These longer term options trade differently than short term options. (these options trade in one month intervals). If the stock we are following stops it's freefall the value of the options will nudge up ten, fifteen or twenty percent. A seven dollar option Call might creep back up to $8.00 or $9.00 at which time it could be sold. In contrast with a five day option a slight reversal in ...
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Power Surges in Option Trading

If your an "Uber" driver working in the downtown core of major cities you know about power surges. If a subway breaks down and the system is broken hundreds of people suddenly need rides. At the very same time the rates you charge will spike up. That's the best time for "Uber" drivers to be out driving. Well playing options on stocks with a day or two to go until they are about to expire is kind of the same thing. Friday May 7th was one of those days. If we look at "Boeing" and "Caterpillar" we will see two examples of what I am talking about. First "Boeing" and it's one day chart and a look at it's 230 "Call" options and it's 232.50 Call" options. What specifically we are looking at is the highs and lows on the trading price of the option series. In the first case there are two sets of numbers. A low of .51 and a high of 6.90 and a low of .16 and a high of 3.40 That's the price swings of the options in one day.
Here now is a look at the "Caterpillar" "Call" options which mimic these same price movements. In this case we are looking at the 235 and 237.50 series of "Call" options and the numbers are a low of .80 and a high of 6.87 and a low of .18 and a high of 4.40
What was the juice that made for these staggering returns? Well in the case of "Boeing" is was the price drop that happened on the opening at 9:34 and in the case of "Caterpillar" it was the opening price drop that happened at 9:33 also on the opening. To catch it at it's extreme your timing had to be perfect. My timing of in at .60 and out at 1.81 on "Caterpillar" that I referenced in my last blog shows that my timing skills need some honing. Uber driver's take note. If your out driving on a Friday morning during one of your surges do what you do best and just keep driving. Don't be fiddling on your phone trying to make these kind of trades. The End.

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