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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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Boeing Is A Strange Animal

Last week I got caught in the mud following Boeing all week. It basically went sideways and ended up being the 17th most activity traded stock on the NYSE "Most Active List" by dollar volume and up .27 cents on the week. The Dow rose only 3 points on the week. Here now is how the Boeing 170 Call options started this week, twenty minutes into the trading action.
Here now on Wednesday April 24th is a look at it's most recent five day chart.
So here is the thing. The 170 Calls closed Tuesday (yesterday) at $4.75 with the "open interest" numbers going up.
Yes the stock has swings but who wants to shell out that much money for an "out-of-the-money" Call option with only three days trading life left in them? Compare this to my last blog on Lowe's where the chart screamed the stock was going up. I am including that chart again. Yesterday as shown in the chart the stock went up and the option series I illustrated doubled in one day.
Now this. Why are the Call premiums so expensive? Well the answer is that Boeing has an earnings report coming out before the markets open this morning. Call option players were paying a touch of a premium for the right to be participating in this action. My initial comments about being frustrated with the high cost of these options totally ignored this reality. Now this report.
Slowing down production to improve quality. That's a damage control statement which helps to pacify the relentless criticism they have had to contend with as of late. All that said, here is how the Call options are trading shortly after the opening today.
It will be interesting to observe at the end of the day if the "open interest" numbers subside. To be continued. Now here they are as of 11:25 a.m.
Now look at the end of the day chart and how the markets closed.
Now look at how the 170 Calls closed the day.
$4.75 to $8.05 to $.38 cents. What to make of all this? Let's back up for a second. Last week I posted a blog on April 15th which followed the 170 Boeing Calls for the week. During that week the 170 Calls closed at $2.70 on Monday, $2.80 on Tuesday, $1.95 on Wednesday, $1.45 on Thursday and $.10 cents on Friday with Boeing closing the week at $169.82 on Friday. So much for the strategy of purchasing Call options which expire slightly in advance of earning releases. Why did Boeing rally on the opening today? Pent up optimism gone array? Store this blog away somewhere in your mind. Tomorrow Caterpillar has their quarterly earning report coming out.The next morning. Caterpillar got smashed,see my next blog. Boeing went down again in sympathy.

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