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Caterpillar Again. An Attempt To Explain The Concept of Creating a "Spread".

Caterpillar just had earnings come out and they were lousy. Read my January 26th blog, That was only only four days ago and it's easy to find. There you will find charts and option quotes which I just updated to complete the story showing how crazy it's price drop was. Holding both both a Call and Put at the same time just prior to the release of it's earning report could have worked out nicely, or better yet, just the purchasing of a Put. Here is a chart of how it sold off in the first fifty five minutes of trading this morning. It's a respectable drop which made all Put holders very happy. So here is a new question. Is there now an opportunity to play a rebound? Today is January 25th and there are beaten up Call options on it that expire tomorrow. Buying a Call option on it that expires in one day is an extreme risk, especially with all of Trump's meddlings. Now look at the pricing of the "one-day-to-expiring" Caterpillar Call option. Can you see how t...
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How The Big Option Traders Made Money This Morning

In most of my blogs I poke around talking about speculating in options on five and ten stocks and sometimes talk about the action in Boeing or Caterpillar. It's all kind of introductory stuff. This blog is different, it's about Amazon, a stock that trades in the $3,500 price range per share. To rich for your blood you might say? I agree but that is where the action is for many of the sophicated option traders. It's big money chasing big rewards. Yet the basic premise of how things work remain the same. This week there are weekly jobless claims reports and the Institute for Supply Management readings on manufacturing activity for the prior month, amongst other reports. The first few days of any month are always busy days of economic reports.
Amazon sometimes exhibits the jitters and it can sometimes be blind sided by bad news. Bad news can send the stock down seventy five dollars in one day. Here is it's trading action yesterday. It gained $8.00 on the day but it was down $25.00 in the last two hours of trading. That's the jitters I am talking about, sellors getting out before the release of job loss/ gain numbers.
So hear we have a stock closing on a Wednesday at $3,479 per share. Would you have the guts to buy in just prior to Wednesday's close a Call option with a striking price of 3,500 which is $21.00 dollars "out-of-the-money" that expires in two trading days? Here is the series of option contracts I am talking about and here is where they closed. They closed at $11.20 a contract with over 31,000 Call option contracts trading on that series in one day! Then in the next the next printout I will show you what price they traded up to on the Thursday morning opening market. Look at how these options jumped up in price.
$11.20 to $19.55 just after the opening at 9:34 a.m. Amazon jumped up $22.00 on the opening. Some option traders trade in a different league.

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