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Looking for a Rebound On A Thursday Morning. The Day Of The Big Crash.

Here is what happened to five different stocks on day two in the aftermath of the Trump tariff mess. It's not very often we see spikes in the market like this. It's Thursday around noon. Look at what tomorrows Call options are trading at. I will track how they turn out. Should "short-term" options players be in markets like this? Let's find out. Let's look at the Calls only. In past blogs I have pointed out that Thursday mornings are not usually a good time to paying for any options that expire the following day. A sixty dollar drop in the first hour or so of trading. Time to play a rebound? Apparently not. Call buyers are not jumping to buy in. Now Robinhood. Trader's are buying back in. What could the gain be here. Now Ndivia. Now Caterpillar. Now Netflix. Now the Thursday market close. Look at how the markets closed on the day. The Call options in this case is up. Here is the five day chart. Now the Robin Hood Call options and it's one day...
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Caterpillar. How Many Lives Does A Cat Have?

First a comment I opened with on a previous blog (see July 7th) . It was on the topic of one day option trading.
Next the Caterpillar chart on Thursday December 27th. Yes this is another blog about one day options.
At the close on Thursday it's up roughly two dollars from it's previous close last Friday. Looking at it's Thursdays one day chart do you think it might lose some of it's momentum on the Friday morning opening? Don't be alarmed if you see the spike in it's volume on it's Thursday closing. That doesn't mean much. It's a common occurance. Now a Friday morning chart of Caterpillar in it's first 24 minutes of trading.
It opened down $3.00 a share and rebounded to where it closed on the previous day. Notice in this time period only 16 contracts traded. That's crazy. Why didn't 1,600 contracts trade? It tells us the world of one day option trading is still in its infancy. Where is this artificial intelligence everyone is talking about? The stock can only go up or down on the opening. It' not that complicated.
Anyone who had the guts to buy the $367.50 or $365.00 series of Puts on the close yesterday could have sold out in the Friday morning premarkets or in the first half minute of trading and did well. In this case well means a return of about four times on their money. Now lets compare this action to what was happening at the same time with Deere. Deere options are thinnly traded. They are not friendly to option holders on the day these options are set to expire.
Granted this printout shows the action only six minutes into the opening but look at it. No volume of trading and the "bid and ask" are ridiculously far apart putting option holders at the mercy of the option makers and stifling the desire to want to buy in. Sure Deere can swing five dollars in one day however it's a difficult stock to play one day options on. Caterpillar, Boeing and Tesla not so much so. Tesla because at times it is so volatile has its own issues making it a different animal to play. So now what? Here is the movement on Caterpillar at 10:30 a.m. Now it is down $4.50. That's a significant drop after a quick morning rebound.
At 9:53 a.m. the bid and ask was $.46-$.56 and now the bid and ask is in a freefall at $2.06-$3.65. Spreads that large are uncommon with Caterpillar options showing a panic in the air. Might it drop ten dollars? With a spread that far apart a ticket into sell which is close to the ask would instanteously pull back the ask. Perhaps you would have play a quick game of cat and mouse to get out. Do whatever you have to make the sale happen quickly however do not do a ticket "at market". Why, well I have gotten robbed a few times doing "at market" tickets on surging or plunging stocks. See my bog of May 6th called "How The Back Of Is Going To Handle My Complaint". In that blog a back office fellow named Romeo shut me down in my objection. I was robbed. Back offices will scam you whenever they can. That's just the nature of their business. It was even worse twenty and forty years ago. If you go in "at-market" you would probably also get robbed. Yet this kind of a selling opportunity is a dream come true. Let's check back in a few minutes to see how this wide bid and ask spread ended up playing itself out. It did when the trading action on this stock stabilized a bit. Now look at this. Caterpillar is rebounding.
The printout above of the Caterpillar Puts captured the height of this selloff frenzy. The Puts we were watching hit a high of $2.68 . Things then changed. Now this.
A $2.68 pricing down to $1.22 in only a matter of a few minutes as the stock changed directions yet again. All this action was in the first ninety minutes of trading. How did Caterpillar close out the day and what ended up happening with this series of Puts? Well none of that really matters because all the action happened in the mornings trading session. Day traders trying to navigate in one day options which expire in 3.5 or 4 hours like to be out of their postions by noon. It's time to get ready to exjoy the weekend. Here is what actually ended up happening. The Caterpillar 365 Puts closed at $1.35.
What happened to the Deere 345 Puts we looked at with the tremendously wide spreads back near the opening of the market? Well here they are. Deere at one point in the day was down over $5.00
They closed a $5.40, their high of the day.
If you remember, at 9:36 a.m. these Puts we were looking at were trading at $1.82. The DJIA closed down 333 points on the day. It was a good day to be looking at one day Puts.

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