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"One Day" Expiring Call Options on Tesla And Why It's So Easy To Get Caught Trading It The Wrong Way.

Let's start with a five day chart on Friday morning. Tesla on todays opening is tradng flat. Is that good or bad if your'e looking for a buy in situation. Doesn't a flat opening tell you to stay away? O.K. stay away and come back to it a lunchtime. Now this. Here we are at noon. Nothing much has changed. Well you could have made good money if you bought Puts around 9:45 a.m. and got out around 11:00 a.m.. What do you think is going happen next? Go up, down or not do anything in the next couple of hours. The deadline to get out is at 3:00 p.m.. Do you have the desire to try this? But first, here is how what the DJIA index is doing.. What now really needs to happen is to have the DJIA index kick up to help drag everything up. That's what happened yesterday to Tesla as the indexes gained about 165 points on 36 minutes. Let me quickly show you how yesterday's Calls jumped. That's the kind of movement Tesla is known for. Now let's get back to today's ...
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Yes Boeing's Earnings Report Was Good and The Stock Jumped Up. With Caterpillar Earnings Report Coming Out on Monday Morning Will It Do The Same?

Let's begin with a five day chart on Boeing which includes todays action showing how the stock reacted to the the release of it's fourth quarter profit report. Note that the stock dropped on the day prior to this release of this of this news.

So today's (January 31ST) ten dollar and sixty cent jump in the stock's price was justified because their earnings were up. To profit on this new release meant you had to get into Call options on the day before this earnings report came out. Are you able to see the element of fear or panic that drove the stock down $5.00 on that day? That was the time to be buying in. But wait. We can't always say that a five dollar a share drop in a stock's price on the day prior to it's earning's report release is going to happen. Yet this time it did. So option players this time were handed a gift if they were bullish on the stock. The short term "near-to-the-money" and in-the-money" Call options doubled in a day on the release of this good news. Now Caterpillar has it's fourth quarter earning's report coming out February 5th before the opening bell. That day is a Monday. Will Caterpillar's stock drop tomorrow on Friday which is the trading day before their earning report comes out? Here is how it traded today, a Thursday.
It's now Friday at the close. No it didn't drop. Look at how Caterpillar jumped upwards again as did it's Call options. This once again is the trading day before it's earnings report comes out on Monday morning.
The stock, once again went crazy up. Remember Boeing dropped five dollars on the day prior to it's earning report. Not Caterpillar. Good news is expected. Where you one of the lucky ones who got in yesterday (Thursday) and bought the Caterpillar Calls which expired today? They more than doubled in one day. So now what? Now we have climbed a wall of euphoria. Let's now stop for a second and ask the question of why would one want to take a gamble on Caterpillar's earning being good. Often times it crashes on good earning reports because the analyst expected more. Let me show you how some of the option pros are playing this. What we are looking at now is a series of Call option a few weeks out (Feb. 26th).
What do you notice? This was Friday's action with the earning release coming out Monday morning. An open interest of only 138 contracts and a daily volume of 1,566 contracts traded. Stop and let that sink in! The pros got in Friday morning and glued themselves to their screens and watched the upward momentum unfold.They mostly all jumped out before the end of the day. Why? The risk of being part of Monday mornings trading action was to rich for their blood. Us, little fish should learn to play the same way.

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