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A Random Walk In The Park On A Monday Morning. A Caution. Monday Mornings Are Often Not An Option Players Best Friend

Let's start with this. It's now 10:26 a.m. A bet on Caterpillar rebounding by the end of the week. There are no takers. Why have to watch the screen for the next four days in agony waiting for a rebound which if happens is just a "break even trade"? But Wait. I made a mistake. The market is actually now down 668 points. What else can we look at? Interactive Brokers. These kind of stocks always do poorly on days with the threat of margin calls. Yet there is something interesting about the printout I am about to show. It is that these options are "one-month-out" Calls. These longer term options trade differently than short term options. (these options trade in one month intervals). If the stock we are following stops it's freefall the value of the options will nudge up ten, fifteen or twenty percent. A seven dollar option Call might creep back up to $8.00 or $9.00 at which time it could be sold. In contrast with a five day option a slight reversal in ...
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Walmart. Does Five Days Buy You Enough Time?

Let's set the stage.
A five day chart and the current bid and ask on an "in-the-money" Call option by $.31 cents.
Notice the tight bid and ask. That's a good thing. Now this morning's early trading.
Light open interest in this series and light to moderate morning trading in these series on the opening. Would I want to hold onto a position like this for the entire week? It's kind of dangerous because at any moment an analysis could come out with a comment about "Christmas Retail Sales". It's something I would get into with the hopes of getting out of on the day. Imagine, people living south of the border that can find brokerages that don't charge fees on trading. In that environment nimble option traders can have a heyday playing options like this with a tight "bid-and-ask". Let's watch this one for a day and see what happens. Now this.
Thirty nine minutes later the stock is up twenty-two cents. What's nice about five day options is that time is not as much of a factor compared to trading options with only, one, two or three days of life left in them. Here we are now at 11:50 a.m. Call me chicken. I would get out. It's 11:50 a.m. It was a good ride with no hiccups. It doesn't always happen that way. Take a profit and run.
The end. Well not really the end. Here is how these Call options closed the day.They did actually hit a high or $2.02.00.

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