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"Tony The Tiger" - A Food Stock

The mood of Wall Street is now changing as the reality of tariffs is starting to kick in. Two weeks ago not so much so. Kelloggs had "so-so" earnings come out a few weeks ago and the stock exploded upwards. Note the very last line above mentions the effects of tariffs are not taken into consideration. So many stocks with "so-so" earning reports have jumped in price based on the "lets make America great again" slogan. Deere stock is shooting to the moon as I keep writing about in spite of declining sales in the last quarter. The sentiment seems to be that they are immune to tariffs. On paper they might be. Read this. Americans are struggling to buy gas, eggs and insurance. Total housing starts in the U.S.in 2024 were down 3.9%. Walmart, the recent darling stock in the last four weeks for Call option players woke up this morning with an earnings report which was healthy but with came with some caveats. Here is what happened. Perhaps the U.S. is starting ...
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Living on Kraft Dinner?

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 "out-of-the-money" contracts which means the stock will have to go up in price over the coarse of the trading day to make a profit. One extreme payout shown here was nine dollars turning into four hundred and forty five dollars! It required the stock to jump twenty dollars in one day. How often does that happen? Not very often however it sometimes does. 2) Deere. It jumped $16.33 on the day. That doesn't happen very often.
In one case here, eighteen dollars went to six hundred and sixty eight dollars. 3) Tesla. It was up $12.68 on the day but lost some strenght towards the end of the day. Option traders widely watch and play Telsa Calls because the stock is known to regularly swing ten dollars in an given day.
Does all this trading seem to good to be true? These few stocks mentioned have a reputation for wild swings like this. What's more, they often trade up and down like this on no real news. Other stocks I follow like First Solar and Snowflake sometimes also have crazy price swings however they are most usually as a result of specific market chatter. Then there are price swings that happen as a result of changes in a companies's operating performance. One price swing that happened on Friday really stood out. Most stocks jumped upwards on Friday but not Eli Lilly. It had a really bad earnings report earlier in the week and then limped back up a bit on Tuesday and Wednesday. Then on Friday the stock got slammed again. Look at these two charts and look at how the Puts jumped up in price. First it's one day chart and then it's five day chart.
Why do I bother to mention one day options on Eli Lilly? Well experienced option traders might have realized a second wave of panic selling might come into this stock given the magnitude of the previous sell off. Bad news reports sometimes have a ripple effect on a stocks price. Good option traders might have recognized that a Friday would most likely be the day of the week when this would happen. It did. Really smart option traders are not having to live on Kraft Dinner.

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