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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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"One-Day" Puts That Crazy People Can Play - Netflix

Read the previous blog first, about Exxon on Friday. The Puts on it's last day before they expire options increased in price in the last few hours of trading. So to did the Puts on Nexflix on that same afternoon. Can you see how it sold off six dollars in the morning trading session (the first chart below) only to rebound almost three dollars? Then the stock got tested again and this time it lost it's steam.
Then what happened? Well here are the 470 Puts at 12:08 p.m. which expire at 3:00 p.m. The stock looks like it is trading in a channel downwards. See the chart below.
What next?
Yes the stock continued to drop approaching the 3:00 p.m. deadline/ expiracy time date. Now look at the same series of Puts at 2:12 p.m. They were trading at $490.00.
Looks so easy right? Let's check out it's five day chart and it's year-to-date chart.
Yes on Friday it looked like it wanted to roll over. * Two things. The reality of trading short options like this. Lock yourself in a room and run a bunch of moniters. Lots of cool stuff can happen on a Friday afternoon. If you going to play in this market focus on stocks in this price range. You need a stock that can swing three or four dollars in one day. Lower priced stocks do not. Big swings at this time of the day - like plus or minus $1.00 swings in fifteen minutes often happen. At some point in time take your profits and turn off your computer. There will always be another trading day. ** On the following day Netflix was down after $12.00 mid afternoon. What a drop.
Keep all of this in mind the next time you are thinking of the stock. It can move quickly.

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