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Caterpillar Jumps Like $30.00 On The Opening

Here is it's chart. Nobody used options to play it. The stock opened stronger. Now what? The Puts? Ten contracts have traded in the 707.50 series. . Why aren't more traders attracted to this situation? Why haven't ten or fifteen thousand contracts on this series traded so far this morning? Sure it's dangerous however the potential to make money on this trade is huge. Over the next few hours or days Trumph will mess up again and say something stupid. He is the most powerful man in the world. Let's see what happens. Now this only fourteen minutes later. Look at the wide spread in the "bid-and-ask"? Nervousness is in the air. Now this, a look at a lower series of Put options, the $700.00 series. When I see 100 contracts traded I get suspicious. A bigger fish is also playing these options. That's a good thing. Going solo can be a lonely game. Let's move forward to 12:15 p.m.. Let's go back to the 707.50 series of Puts and look at how it is t...
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The Power of "Ford" Options

Why am I stuck in the mud watching Ford when there are hundreds of more exciting stocks to watch? That's a good question. The answer I guess has something to do with the concept of leverage and how options on stocks in the five to fifteen dollar price range can sometimes have explosive moves based on percentage increases in short periods of time. Look at this week's chart of Ford and look at the opportunities it provided option playes.
So the question then becomes how is it possible to anticipate these moves? Well the first big move upwards on the far left hand side of the chart was an earnings release explosion. The following chart better shows how the stock traded in the few days leading up to the release of this news. That was an instant double if you were paying the short term Calls. In at 3:58 p.m. on the previous trading day and out at 9:34:00 a.m. on the following morning.
Trying to anticipate earning reports is tricky. With Ford there were reports of chip shortages offset by reports that there was a shift to producing more profitable and more expensive units. When Boeing had their earnings come out recently the stock exploded upwards on lower losses than expected. That one was a more difficult situation to guess at. I also talked about Caterpillar. They had a decent second quarter earning report as expected and the stock sold off on the release of this good news. It can be said that the good news was already baked into the share price. It almost takes a suprise earnings report to make stock go up. Seasoned option players can be opportunistic in playing these opportunities however they run the risk of sometimes getting the wrong read on things. Earning releases can cause volatile price swings. Let's once again go back to the initial five day chart on Ford and tie the last blog into this one. In this five day period of time the chart shows four breakouts to the upside and four breakouts to the downside. Easy to play you might ask? Not really. Easy perhaps if you were trading like the Americans are which means commission free. Its would be nice to be able to get out quickly and at not much of a loss if you find yourself rethinking the entire trade. On a differing note expect to see Robinhood Calls and Puts start to get considerable attention. Last week they made their debut for the very first time. * Readers take note. I used the words breakout, explosive, risk, suprise, tricky and volatile in this blog. An August 9th Monday update. Here is todays one day chart on Ford and a look at the 14 series of Calls that expire this week. With four days to go the morning dip provided a good buying opportunity. Ford was down on the day five cents.

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