Featured

"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 ...
Post a Comment

Another Positive Reaction To A Poor Quarterly Earnings Report

In my most recent blog I talked about Lowes and how the narrative of "poor earnings" was turned into a positive. Sales were off and the stock dropped however two days later it's right back up again. Playing options on the news found in quarterly earnings reports can be tricky. It's easier sometimes to rationalize the exercse of purchasing of Calls after a stock has dropped than it is to buy Puts in anticipation a drop. Yesterday Deare came out with a shockingly poor earnings report and the stock jumped $28.00 on that news. What heck was that all about?
Read the details of how off their sales were off in different divisions. What makes you think things are going to turn around? A 10% or 15% recent decline is something that could be shrugged off but not declines of let's say 38%. Do you know how difficult it is going to be to ramp things back up again? How do you know demand will pick up again? Wouldn't company insiders know these results were going to be so poor and wouldn't they be shorting the stock? The funny part is if they did they would have got smoked. Here also is what adds to the confusion.
Now this, a look at this one particular series of Call options which were well "of-the-money" going into the markets opening.
Notice the crazy high Call option volumes. Look at the number of 3,761 contracts traded in this one series. We typically see numbers of let's say 5 or 8 or 16 contracts a day. How can this be explained? Contrast this to the volume of trading in the 400 series of Calls which were closer to where the stock was trading at on the close of the previous day.
Now here is how Deere was trading one hour into the following days trading(Nov.22nd).It's holding its gain with the markets up a touch. I would have thought that there would be some profit taking.
*** There is a mystery to this blog which still needs to be explained. It's the "out-of-the-money" Call option number of 3,761 contracts. A chart from Yahoo finance verifies the truth of this number. Do you see the 3,761 number again on Nov. 21st? It sticks out like sore thumb. It was an "in-and-out" one day trade.
A price swing on the day of $.52 to $11.97 on an option series wildly "out-of-the-money". It's nuts. Is this artificial trading? Read this.
One final thought. A look at how Caterpillar recently jumped on it's earnings report about two weeks ago and where it is now.
It makes you wonder if Puts on Deere should now be something to consider. ** Read my November 22nd 2023 blog about Deere and it's then current earning's report.

Comments

Post a Comment

Popular posts from this blog

Living on Kraft Dinner?

Image
What does the word disconnect mean? As a verb it means "to sever or interrupt the connection of or between; detach". Option trading - one day options - is a disconnect from the world. What happens to slightly "out-of-the-money" Call options on Costco when the stock shoot up thirty dollars on the day? I will show you what happened on Friday to Costco Calls and the options on a few other stocks I frequently watch. What a disconnect from the real world. But before that a look at how the indexes traded. 1) Costco. It's five day chart and a look at how three of it's option series moved upwards in one day. You may not know how to read these printouts but try to read the highs and lows on these option pricings. One printout shows an "at-the-money" option which means you are buying a contract on the stock, good for one day only at a locked in price equal to (or very close to) what the stock is currently trading at. The other two contracts shown are ...
Read more

The Little Engine That Could

Image
Walmart again. It's all I seem to blog about. Here is it's five day chart. The stock keeps going up and the option series are set up in one dollar spreads. Even a fifty cent move on the stock moves the needle on these Calls. Look at how this series of Calls was trading yesterday at 3:00 p.m.. Now here is this same series of Calls just before noon today. Thirty days of upward action like this punctuated by the off day of decline. Now notice the higher volume of trading in the series of Calls with the higher striking price. These are the ones's with more leverage. At the same time look at the five day chart on Costco. The two stocks sometimes trade in tandem. Humpty dumpty sat on a wall .... a had a great fall. Someday soon a fall might happen but what a great ride it has been.
Read more

A Fireside Chat - One Year Options and Thirty Day Options. Which is Better?

Image
Some say to think small, not big. Trying to play Disney options is thinking big. It is a stock slighty out of favor. If we start with it's a three year chart, we will see it is down by about 50% over that period of time. Now it's one year chart. If the stock can break 110 in early 2024 the sky is the limit. It does have a lot of moving parts so anything could happen. Look at these Calls options one year out. One year in options buys a lot of time.They look reasonable. If the stock ever inched up to the $105.00 price level in the three or four months these options would jump up in price by about 50%. Even more if they had really good news. Yet it's the "what-if" aspect of the equation that castes such a trade in doubt. "What if" stories just don't cut it. There are to many variables in play. Then again, why are we even thinking of long-term Call options after a December's rally? Let's switch gears. If consumers are out spending for X-mas...
Read more