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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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Deere and Company With One Day To Go. Yes or No? You Decide How Smart You Are.

Let's start with a question. There is one day to go and Deere today on a Thursday dropped over $13.00 dollars on the day. Should you jump into one day Call options on it right now looking for a rebound or wait until the following morning? Moving forward, in the Friday morning's premarkets at 8:30 a.m. we can see that the stock is up $1.50.
Here is proof of yesterdays downward action.
The premarkets are expecting to open higher. Are you to late to the party if you buy in (one day, last day) Call options that is? After dropping that much yesterday it should rebound right? Right? Let's stop. As the writer of this blog I think the real question should be who really wants to be speculating in situations like this? It's so dangerous. Learning to pick the battles you want to fight should be a very big part of this exercise. Yes I sometimes like to play Deer Call or Put options with only one day to go in their trading life but not after a day when it drops $13.00. To me that sets off alarm bells.
This Friday morning opening chart look ugly? the stock may never come back up on this day. Now let me share with you something that should help you to put into perspective how crazy this exercise is and why the stakes are so high. If we backtract only to the start of the trading week look at how different the mindset was back then. "Deere" was trading so much higher in price and buyers were paying stiff premiums with the expectations that the stock was still going to go higher.
Next, brace yourself for this news. "Deere" is down over $17.00 on the day at 1:10 p.m.
What a downward move.
What a move to the upside on this series of Puts.
Here now is how the markets closed and a look at Deere's five day chart closing out the day.
In summary, Deere was up on the opening to attract new Call options buyers and too shake out the Put option players who went into the morning's opening holding onto sizeble positions. That was something I noticed. Then it dropped wiping out the newly minted Call option holders and allowing Put buyers, there were not many of them left, to purchase even more Puts at a reasonable price and then play "one of the of the month's best Put opportunities". The DJI ended up losing almost 1,000 points on the day! That doesn't happen very often. ** Also see my April 19th blog on trading the thirty day out "Deere" Call and Put options.

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