On Monday I did a blog on buying this week's Call options on Walmart and at the time of writing it I was looking for a small morning upward move which did then happen. Today is now Thursday and there was a big sell off in the markets yesterday. Tesla for example sold off and here is a five day chart showing what happened to it. Today it is slightly rebounding as are most other stocks.(That often happens on the day after the DJIA drops 620 points! Traders jump in looking for bargains). Thursdays however as oftened mentioned are not the best of times to be buying into "one-day-options" on stocks that expire the very next day. In less chaotic times that would not always have been the case. Things like the release of farm payroll reports would often come out just before the markets opened on Fridays and they would help move the needle on the indexes going up or down. Getting into option positions on a Thursday with the intentions of getting out in the premarkets or just after the Friday morning opening morning bell was often a profitable trade to make. These types of trades are now less likely to pay off. Why? No longer are the markets as focused on interest rate cuts and unemployment numbers which once held the spotlight for a very long period of time. Now we find ourselves in more of a "free-for-all' situation. Anything can and does happen.
So how is any of this revelant to Walmart's trading pattern today? Well a whole bunch of stocks are rebounding after yesterdays one-day knock down. Walmart was one of those causalities. Look at it's chart. Could you buy into it now and get out later in the day with a profit? Fantasy thinking, one might say. Perhaps but then again even a seventy-five cent move upwards at this point in time would create a nice trade. Now this, a look at how Walmart was doing in mid morning trading after a big sell off on the previous day. It was merely going sideways.
Let's look at the 93 series of Calls. (On Monday we were looking at the 94 series of Calls).
At 10:22 a.m. the stock is up six cents. It was a lot
higher on the previous day. If the markets show any signs afternoon strenght could these rally? Now let's quickly jump ahead. Here is how the markets closed out the day which once again is a Thursday.
The DJIA was up only 15 points. Walmart was down fifteen cents with most of that downward action happening in the last thirty minutes of trading.
Why did it sell off at the end of the day? One reason is that Costco crashed all week. Walmart and Costco are kind off in the same space. Here is the Costco five day chart.
What does all of this tell us? It tells us to stay away from owning one day Call option positions going into tomorrow's Friday opening. If you want to play options on this stock then wait until tomorrow and do so with fresh eyes. You will then discover yourself to be in a completely different mindset. Now let's skip ahead to a suprise Friday ending. Here is how the markets were trading at 3:00 p.m. Now for a look at the one day trading chart on Walmart leading up to the 3:00 p.m. time period deadline to be out of any options you are holding. This would be the exact time that any one day options you are holding options would be expiring. .
Now a look at how the 93 series of Calls would have expired.
To recap what just happened. The $92.00 series of Calls closed on Thursday at $.85 and then opened Friday morning at $.43 . Then at 9:47 a.m. the stock dipped to $91.09 at which time the $93.00 Call options sold off to a low of $.06. a contract or $6.00. Then at 11:43 a.m. the stock rebounded to $93.74 and the same $93 series of Calls rebounded back up again to $.77 mark or seventy-seven dollars. Finally at 3:00 p.m. (which is the deadline for retail traders to be out any positions they are holding) this series trading back down at $.10 or ten dollars a contract. Was any of this ride playable? Maybe a case could be made for purchasing the 92 series or 93 series of Calls fifteen minutes into the trading action and catching the late morning reversal rally. A final note. During the merriment of all these happenings analyst were chiming in with random observations. On Friday mornings not much of what they where collectively saying mattered .
The action in Walmart and Costco options can sometimes be fast and furious.
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