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What does the word disconnect mean? As a verb it means "to sever or interrupt the connection of or between; detach". Option trading - one day options - is a disconnect from the world. What happens to slightly "out-of-the-money" Call options on Costco when the stock shoot up thirty dollars on the day? I will show you what happened on Friday to Costco Calls and the options on a few other stocks I frequently watch. What a disconnect from the real world. But before that a look at how the indexes traded. 1) Costco. It's five day chart and a look at how three of it's option series moved upwards in one day. You may not know how to read these printouts but try to read the highs and lows on these option pricings. One printout shows an "at-the-money" option which means you are buying a contract on the stock, good for one day only at a locked in price equal to (or very close to) what the stock is currently trading at. The other two contracts shown are ...

Caterpillar Drops on No News

This happens. A stock drops for no reason and then a day or two later viewpoints come out to explain why this has happened. Caterpillar this morning is a case in point.
Here is what the D.J.I. is doing at 10:37 a.m.
Here is how the Caterpillar 285 Calls are doing which expire this Friday. This printout is at 10:32 a.m.
Note they ended up going lower in price after this and went down to $1.78. The best time to have gotten in if you wanted to play a rebound was at 10:46 a.m. which was 14 minutes after the above printout. Timing is everything. Now here is a mid afternoon printout of how Caterpillar is now trading. Note the stock is trying to go sideways.
Here now is what the D.J.I. is doing at 3:06 p.m. It's still not having a good day and there is a good chance it could drop even more before the closing today. When the market struggles like this all day odds are it's not going rebound and if it does it could get knocked down again on the following opening.
If you were a trader you could take a small profit on this trade at this time and just wait for something else to do. I will tell you later how this position closed the day. Guess what! Here is how the day ended.
Day traders can make interesting decisions. A Thursday morning update in the first 45 minutes of trading. Buying in at the 3:59 p.m. plunge was the way to go.

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