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"Tony The Tiger" - A Food Stock

The mood of Wall Street is now changing as the reality of tariffs is starting to kick in. Two weeks ago not so much so. Kelloggs had "so-so" earnings come out a few weeks ago and the stock exploded upwards. Note the very last line above mentions the effects of tariffs are not taken into consideration. So many stocks with "so-so" earning reports have jumped in price based on the "lets make America great again" slogan. Deere stock is shooting to the moon as I keep writing about in spite of declining sales in the last quarter. The sentiment seems to be that they are immune to tariffs. On paper they might be. Read this. Americans are struggling to buy gas, eggs and insurance. Total housing starts in the U.S.in 2024 were down 3.9%. Walmart, the recent darling stock in the last four weeks for Call option players woke up this morning with an earnings report which was healthy but with came with some caveats. Here is what happened. Perhaps the U.S. is starting ...
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Towards Understanding How "The System" Favors The House

Understanding the "bids" and "asks" is study in itself. The system is set up to ensure that most option traders are dissuaded from speculating in short term options. Look for example at the spreads on the opening on these Caterpillar Calls.
The stock had a decent bounce on the opening however only one contract traded and it traded for only eight cents more than the previous days close. Does that seem fair? Not really considering the options we are looking at are "in-the-money" and the the stock made a decent bounce. The spread between the "bid" and "ask" is huge. The following example illustrates the same thing.
The stock is only up a touch but the "ask" is priced defensely making it expensive to buy into yet the holders of the Calls are not being rewarded for the stocks upward swing. Early morning "bids" and asks" like this are troublesome. It's not only Caterpillar stock, there are other options series on other stocks that also trade like this. Now this. Look at the volume of option trades and the tight "bid" and "ask" spread happening in the early morning trading on Nvidia.
What a totally different story. Look at the tight bid and ask. Look at the massive number of option contracts trading. In this case they are "out-of-the-money" options.If you want to pay options on stocks with tight spreads find a companies like this one. In recent months this stock has been exetremely volatile. Now back to Deere at 10:30 a.m. to see what has happened.
Can you see how someone split the diffence and added a little bit more to purchase one Call option at $2.67 (remember the bid 2.18 ask 3.35)? That was almost an hour ago and the option has lost almost half it's value since then. My point is that purchasing Calls when the spreads are so wide can leave you vunerable. That plus why be buying Calls on a Thursday morning on options that expire the next day? Buying in on the close on a Thursday looking for a Friday morning bounce (I am not a big fan of this technique) or buying in on a Friday morning looking for a reveral or a suprise upward spurt makes more sense. Having this this, the market went crazy to the upside on the following day on the news of a September interest rate cut. Now back to the Nvidia Calls at 10:56 a.m.. There is very good chance that these Calls could end up expiring worthless.
Here now is how the Caterpillar $342.50 Calls closed the day.
The Caterpillar Calls never hit the $4.00 mark they were asking near the start of the day. What about Deere? The same thing. The Call options on the day's trading never exceeded the morning's asking price.
Be wary of early Thursday morning asking prices on Call options that expire the next day. You are paying to much of a premium for a very short period of time. Also consider that the wide spreads on the opening helps to keep many traders away. Why? Well it becomes more difficult to do a ten or twenty minute profitable trade. The first hour of trading is often when most of this kind of action happens. Nvidea option players have discovered that. * Now here is a five day chart of Nvidea.
Look at how stupid it was to be thinking of Nvidea Calls on a Thursday morning. So much happened after that.

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