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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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Caterpillar - Going Back to This Website's Roots.

Look at Caterpillar's five day chart. It has nice spikes.
Now it's one day chart.
Now check for news. Well its not brand new but it is news.
Nothing is gauranteed from looking at the five day chart. It closed strong. It might rally on the opening. No it didn't.!
Here is how it is trading at 11:00 a.m. the following day. Down like $2.65 in morning trading.
Now Wednesday morning.Down again.
There was no news or no reason for this drop. It is a Wednesday morning. Look at the lack of interest in playing these Calls.
Wednesday's are the one day of the week for market reversals. We are still a tad to far away to introduce the concept of how the stock will react to the release of quarterly earning reports. That doesn't happen until August 6th. The low volume of trading is not a particularly attractive feature to option traders. These 325 Calls are $1.29 cents "out-of-the-money". Any kind of a two or three dollar rebound would have a positive effect on these Calls. Let's look at what happens next.
The Calls doubled in price. Blogs like this talking about Wednesday reversals and playing one week options are a common theme to this website. Here now are the same Calls on Thursday morning.Caterpillar can suprise.
More action happened on Friday.
I caught a slice of this action.
I gone in to early and had to endure some pain. I should have waited until Wednesday to get in.

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