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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 ...
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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 ti difficult to play.

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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 ...
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