Tesla - One Day Options. Not Your Typical Read

This blog is going to be a tough read because it tries to track Tesla's early morning option trading in the last day of trading in the October 18th 220 series of Tesla Calls. Critics of "one day" options are having a hayday in pointing out these "one-day-to expiring" options are a mockery to concept of sound financial investing. Here is Tesla's premarket trading price in the 220 series of Calls at 9:29 a.m. on Friday Oct. 18th. They are flat.

Remember last Friday was an exceptional day for the Tesla stock with it being hit with a $21.14 drop on the day. Do today's traders remember this? Probably not. Why should they? It's a given this stock can be volatile. Option traders playing the downside last Friday on Telsa made out like bandits. Now it's 9:31 a.m.reading.

Up only eleven cents. Option traders are in a period of time where they have to deal with early morning trading jitters. Is there a glimmer of hope that this stock might bounce up one or two dollars? That small change in price could cause these Call options to double. That's what traders in this series of Calls are hoping for. Anyone buying in now would know that these options will be have be closed out by 3:00 p.m. in the afternoon. Closing out a position can be done at anytime in a matter of seconds.If you don't close out your position by that time you will be notified to do so or just simply sold out without your approval "at market". That's the way the system works. Now moving on to a look at the 220 series of Calls at 9:36:42 a.m.

The $2.94 selling price would have been a premarket trade. Premarket trading is another topic in itself. Now a 9:43.39 a.m. reading of it's 220 Calls and it appears more confidence is coming into the markets.

Let's also look at the Puts at 9:45:59 a.m.

It's a seesaw.

Now at look at 9:50:41 a.m.

It's a seesaw however if you look at my Wednesdays blog about this same series of Calls you will see an open interest of over 66,000 contracts one this one particular series of Calls. What does that tell us? It tells us that experienced option traders don't find value in trying to trade in this space. Experienced traders find more value in participating in mid week swings. What's the D.J.A.I. doing?

Now a 10:31:23 a.m. look.

Stop, stop, stop. Trying to outguess the market on a Friday morning is not a fun space to be in. Yet think about this. Tesla is perhaps one of the most actively traded auto/teck stock in the world with tens of thousand of hungry option traders watching it. Why couldn't this stock jump two or three or even ten dollars on the day? It has a history of doing that.Here is it's current five day chart.

Why not look at the $222.50 or $225.00 Calls? Could momentum now come back into this stock again today?

Now this. Back to a look at the 220.00 Calls. Bid $1.96 ask $1.97. Just 23:28 minutes ago they were trading at bid $1.37 ask $1.38. A decent move and a talk about a wonderfully tight spread.

Think about this. All the energy one can put into thinking about Telsa's current situation is somewhat meaningless. The next few hours are going to be roller coaster ride. Here is what the markets are doing.

What's happening at noon.

The stock is making a perfect reset, squeezing both the Call and Put holders.

Here are how the Puts are trading.

Let's jump ahead to the closing and remember that retail option traders have to out of their postions that expire that day by 3:00 p.m..

While the 220 Calls closed at $.70 cents we have to look at where they were trading at $3.00 p.m. which once again the deadline to get out. Here is it's one day chart.

A 3:00 p.m.the stock was trading around $222.00 making the 220 Calls worth about $2.00. So anyone buying in during the moring in the $1.30-$1.90 range just basically got there money back or made a little bit is they were lucky in their timings. Anyone in the 222.50 options or higher did not do so well. Tesla ended up trading down on the the $.19 cents so the entire day was basically a wash. I hope this blog gives you a better appreciation of how complicated option trading can be. * One final note. Look at the high volume of trading in the Puts leading up to the lunch hour time period. Some traders were looking for the bottom to fall out of the stock. More Puts were trading than Calls. Could this be one of the reasons the option makers supported the stock in the afternoon? This might be something to be conscious of the next time you are watching Friday afternoon trading.