We hear these banterings all the time.
Now here is how the Deere $407.50 series of Call options traded yesterday on a day when the stock was down. The volume of trading on this particular series of Call options was light and the options were down 50%. Not many retail players play options on this stock.
Here is it's one day chart. It closed strong.
So what did I do at 3:51:30 p.m.? The print is light and difficult to read but I says I paid $248.00 U.S. dollars for one option contract.
I bought one slightly "just- out-of-the-money" Call option which expires in two days time. Wednesday going into Thursday morning's trading sessions can be profitable if the markets decide to uptick and this time we are looking at options that just dropped 50% in one day. So what happened? Here is where it starts to get interesting. There is something called premarkert trading. If you're watching the market about an hour before it opens you can see quotes showing the stocks then curent bid and ask. This morning the bid and ask was about $3.00 higher per share than it's previous days closing price. That was good news for me. Many others stocks also showed similiar price increases. If you want to seize the moment you can enter, in my case a sell ticket and hopefully get a fill at that particular moment in time. Often times I have witnessed lofty premarket stock prices sink away as it gets closer to the actual opening bell. If you attempt to do a premarket buy or sell ticket two issues must be noted. First, in the premarket trading there are no posted "bids" and "asks". You blindly specify the price you would be willing to buy or sell your contract at. If you go "at market" in your sell ticket you will be scalped. Now here is Deere's five day chart.
Now the action in this series of Calls in the first four minutes of trading. Deere is up strongly and yes I did put in a premarket sell ticket. I will tell you more about that later. Can you see from this printout how three contracts traded and can you see how wide the spread is between the bid and ask? That favours the house as it makes it difficult to buy or sell into or out of.
The second thing I want to share about premarket trading is that if you do get a fill, it is not reported to you for about fifteen minutes after the markets open. This is not really fair. In other words,if there were three option fills in the first four minutes of trading I would be left in the dark as to whether or not one of those fills belonged to me. Now this.
Here we are six minutes into the markets trading and still only three option contracts traded. The stock is up $4.39 which is a healthy gain. Imagine trying to sell out your Call postion at this time? You would have to settle for a price somewhere in the $4.50 range. Now this.
At eight minutes into the market the bid and ask on this series of Calls are starting to tighten up. At this point in time I still have no conformation that I got a fill however I have reasons to be hopefull.
Now this.
It's difficult to read but it says bid $1.46 and ask $4.90 and the conformation of my fill which happened back at 8:52:09
a.m- at $4.96. That was a good fill. Can you still see how the bid and ask spread is still absurdly large? Now this, a look at the action sixty-five minutes into the trading session. The stock is still creeping up.
Now this at 10:36 a.m. .
How did Deere and this particular series of options close the day? I will show you.
A got a doubling in price for being in a nine minute of market trading hold. That's not bad. Plus there was no worry about having to watch the position all day. If you want, please read one of my last week's blogs about Deere option trading. Not many other option traders seem to be playing Deere options.
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