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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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Eli Lilly Calls With Four Days to Go.

This is a four day trading week starting with Tuesday. Monday was a holiday. Here is how the stock Eli Lilly traded on the last five days and in the last three months.
The stock is surging upwards (thanks to a new weight loss product) and the following Calls and Puts are very expensive. Here are Fridays closing prices on the 780 series Calls and Puts. First the Calls.The Calls cost $14.35 and the Puts cost $11.70. They only buy you four days of trading time.
Now here is a chart showing how the stock closed out the day.
Finally, here is how the 780 Calls and Puts closed the day.
So the stock lost $24.60 on the day. Note the" Open- Interest" on the Calls and Puts stayed the same from the previous day. What happened was "covered-Call-selling" in the morning, meaning as the stock tumbled it was a no brainer to be selling the Calls if you already owned the underlying stock and then buying them back at a profit later in the day. There was also some just outright "Put-buying" activities triggered in part by how quickly things were crumbling down in the late morning, also with the intentions of getting out before the end of the day. That's why the numbers of open interest activities ended up matching perfectly from the previous day. Most of this would be "programmed-buying" triggered in part by a general sell off of the markets in their entirety. What proof do I have that this is what went down? Well look at this early morning action.
Well 139 Put options where opened by 9:41 a.m. followed by
a volume of 157 Puts at 9:47 a.m. What this means is that in the first 17 minutes of trading,traders were nibling gingerly at this action. After that another 1442 contracts traded on the day or 721 "in-and-out" Puts transactions. It took the first fifteen minutes of trading to prove that a general freefall in the markets was about to happen. Telsa was down $6.19 on the day, Caterpillar was down $8.17 and Snowflake down $10.23. It was just one of those days were the high flyers got picked on. The small "retail players" didn't catch any of this action because at the start of the day both the Puts and the Calls were simply to expensive to play. "Covered Call writing" is a strategy that the "little sharks" can't afford to do.

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