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Caterpillar - Catching A Reversal On A Monday

Mondays are not the best of days to look for reversals however Caterpillar jumped upwards a modest amount which impacted the value of this series of Puts. The Puts are off about 50% on the day at this point in time. This is a 1:36 p.m.readout. Here is it's five day chart. Now its one day chart. It's Puts. Why consider them? It would seem like kind of a random thing to do. Why fight a strong stock? One reason is that the markets are only mildly up and could give back some of it's gains before the end of the day. Caterpillar could be gaining strenght based on all of last weeks business articles talking about how Caterpillar could potentially benefit from all this new AI movement. Caterpillar afterall builds heavy equipment which can be used in the construction of nuclear reactors. Notice that the five day chart is in an uptrend and notice the small open interest numbers in the Puts. That's understandable. No one wants to hold Puts on Caterpillar when it is in this...
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Biogen - A Tough Cookie to Play

Drug stocks are difficult to play. One year ago to this date Biogen was trading at $292.20. Today its at $193.61. That's down almost $100.00 on the year.
Now look at it's three year chart.
Back on May 11th 2022 the stock dipped down to $191.07. So the question now is will that now be a support level? That could be something to watch. How do you play options on a stock which has dropped for a year or more? You can't really. The system, for lack of better words has a built in defense mechanism. Let me try to explain it this way. Yes I think a rebound might be imminent for technical reasons however there are barriers to entry. Look for example at how expensive the one month out Calls are.
A May Call contract (one month out) slightly above the current asking price is $8.00 a contract. When was the last time this stock ever went up $8.00 in one month? Well there was one $10.71 bounce between March 6th 2024 and March 12th 2024 so in theory anything could happen. Yet having said that, it's still a crazy price to pay and a risk much to high to take. Now let's look at these Call options that will expire in three days.
Note only 15 contracts traded on the day and an open interest of only 9 contracts. What's more, the spread between the bid and ask is high making it more difficult to trade. What this tells us is that traders don't see any value in trying to navigate in these waters during periods like this. It will be interesting to look back at this blog in one months time to see how this situation played itself out.* Here we are now in July, some three months out. So what happened?
The stock did find a support level. It's still to difficult to play. What is missing is that there are no spikes of upward volume coming into it. Without that happening this stock could dip further.

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