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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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Sweet Spots In Option Trading - Deere

A fly on the back of a horse. An option contract that expires at the end of the day on a billion dollar company that few traders dare to play options on. A company for the most part void of news releases with Call and Put premiums which are prohibitively expensive. Which stock am I talking about? John Deere. Here is it's five day chart.
Now here is it's one day chart on Friday which is the last day on the above five day chart..
Can you see how it went up in price in the early morning trading and then sold off? Think about how this would effect the Puts. Yet then again who would have the nerve to be playing them?
In the early morning trading they were down to $98.00 a contract and then a few hours latter hit a high of $420.00. Look at how insignificant both the "open interest" numbers and the "volume of contracts" traded numbers were on the day. Friday morning reversals are something that some option traders learn to cherish. If you can't get your head around this idea, I get it. Option trading is afterall a solo experience. Call me timid. I played one Call option contract on Deere (the $402.50 series of Calls) for a two hour hold on Thursday. It's a good thing that I didn't hang onto to it going into the next day.
I didn't want to be holding onto the contract overnight. *** On this stock I find that the option premiums are crazy expense until part way into Thursday and then into Friday when options on it on that day expire at 3:00 p.m. ****** One final thought which I am hoping might help to further quantify the risk involved in making this type of "last day" option trade. Deere hit a high of $411.69 in early Friday morning trading. That's when the 410 Puts went down to $98.00 a contract. On a stock which is known to swing five dollars in anyone day isn't it conceivable the stock could drop in price over it's next five hours of trading? PART TWO OF THIS STORY. Deere drops $20.00 on the day, Thursday May 16th on trade talks. Look at this five day chart.
Can you shake it all off and buy one day Calls that expire tomorrow?
To be continued. Next Friday May 17th. In the last day Deere got dumped on with fears over trade war talks. Here are it's new charts. First the thirty minutes into the Friday market chart.
Now it's five day chart.
Next how the Call options which expire today are trading. What a gamble.
To be continued.

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