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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 ...
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Snowflake Part Two : Thursday Overnight Position Going Into The Final Day Of An Options Life Are Not My Cup Of Tea

The 172.50 series of options on this stock will expire tomorrrow. Today is a Thursday. The first printout shows a bit of a struggle on the opening in the first nine minutes of trading and a return to price it closed at in the previous session. (It did have a nice rally on the previous day then to only give it up). Could it rally again this morning? Now the second printout below the following paragraph shows the high volume of trading pouring into this series of Calls just after the opening.
These high volumes of trading shown below happened in the five minutes and twenty one seconds of the trading session. Traders bought in on a slight dip looking for a reversal. Good for them. Are these traders hoping to be out at a profit in the next fifteen or thirty minutes? Yes. Get in and get out. Catch a profit as the stock is deciding which way it will go. It's early in the morning trading session and the volume of trading is always the highest in the first and in the last hour of trading. What were the indexes doing? They were somewhat offside. If they were going down in a big way these Call options traders would be sitting on the sidelines.
Can you see these high volumes I am talking about? Contrast these option trading volumes to the stock First Solar I also mentioned in my last blog.
Now for some news. The party for these Call options is now over. The high of the day turned out to happened at exactly 9:39:00 a.m. Look at it's one day chart.
Are you able to see how at 9:58 a.m. these options have gone cold? Yes they still have one day to go before they expire but why not take a profit when it is there? Anyone buying in at 9:35:24 a.m. had a chance to get in at $1.25 and then to get out at prices up to the $1.98 mark per contract at 9:39:00 a.m. That turned into a four minute window of opportunity to take a profit. To much work and to much detail to keep track off you might say? Maybe, however that's what Thursday morning option trading is all about. It's the one day of the week not to let open positions whittle away. The tip off this time that this could happen was the high volume of Call options traded in the first five minutes of trading. Learn to take profits on one day to expiracy options when you see them. Now lets speed things up to the last five minutes of trading with a late in the day look at it's five-day trading chart. Now it's time to adapt a new strategy if you want a piece of the action. Look for a striking price closer to the stocks now current trading price, $2.50 cents lower to be exact. That's if you now want to play the stock for a morning bounce. Yet why would you? The risk is to great. Why hold an overnight postion like this? The stock could sell off two dollars on the opening.
I don't really like it's sideways moving action all day. To me it doesn't inspire a Friday morning bounce. Now look at the 170 Calls with five m inutes to go.
Here are these same options on the close. The last five minutes of trading were rough on them.

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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 ...
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