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McDonalds Again And A Follow Up To Yesterday's Blog..

Some option traders on Friday mornings just want to be in and out in the first hour or so of trading on short term options they feel comfortable trading. In the second half of the day most of the action calms down. Take your winnings and run. McDonalds sold off a little bit yesterday afternoon and firmed up a bit towards the closing. Could this "mostly downtrend" continue? Here is a partial look at the opening bell's action, today a Friday however let us first look at how the stock traded yesterday. Now a look at it's trading pattern at 9:32.22 a.m. Now this, McDonald's jumps up $4.98 and the 317.50 Puts we followed yesterday which are now "out-of-the-money" acted accordingly. During the fist 2.22 minutes of trading they traded down to 34 dollars a contract. Now this. In the first three minutes of trading the stock jumped a bit and started to come off a touch. These Call options where not attacting all that much attention. The bid and ask jumped up ...
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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.

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