If you just jumping into this blogging site for the first time I want to say that this blog will be one of the most unfriendly bogs to read. You are catching a snippet of a series of blogs about short term option trading. I have often said that options with two days to go are my least favorite options of the week to play. They are "flip-of-the-coin" situations with the passing of time values eating up a substantial part of the option's premium. Monday morning one week options, Tuesday afternoon options which expire on Friday and Wednesdays options which also expire on Friday and which often benefit from weekly directional shifts are free of these time value worries. In other words, don't be holding Wednesday options going into Thursday. One more don't. Don't open up positions on Call options which tend to be a bit more expensive than Put options on Thursday options which expire the next day. Yet having said that sometimes in the last four or five seconds of trading on a Thursday I will jump in "at-market" looking to get out with a profit in the premarkets on Friday. Stocks like Boeing can move on news that was never expected. (These are my observations only. Everyone should try and learn from their own observations). Now here is what Walmart is doing. I tracked it week. A five day and one day (Thursday morning before 11 a.m.chart).
Now the 90 series of Calls.
A slide of $.47 cents dropped the value of these Call options 50%. That's exactly the concern I have about Thursday options. At noon the Calls rebounded slightly but are still down on the day. The spread of five cents make them awkard to play. Option makers are protecting there own self interest.
Does this mean that two day options are bad trading vehicles on all stocks? Not really. Look at First Solar today 12:11 p.m.
(In December I did three blogs on short trading of options on this stock). Certain stocks like First Solar, Snowflake and Tesla seem to do whatever want no matter what day it is. Let's jump to the the end of the trading day (Thursday) and look at how Walmart closed on the day.
That proves what I talked about when I said Thursdays are wasted days to be playing two day options. The action however is now set up perfectly for the action that starts tomorrow on the opening. In the following two readouts look at the open interest numbers.
The Puts are slightly cheaper than the Calls when the odds are pretty 50:50 and the Puts have a higher open interest numbers. With the stock closed exactly at $90.00 all of this is slightly rigged. Some traders are hoping to double dip on this action. I don't like set ups like this when there are so many more obvious "not rigged" moves to discover. Sorry for being so blunt. Tomorrows first five minutes of trading is going to move either the Calls or Puts up 50%. There are easlier things to play.**** Friday morning five minutes into the action.
I was pretty close in my prediction. A late morning suprise. Costco us up $14.00 and Walmart is up.
There is no real news to account for this action. Here is how the DJIA is trading.
Might the Puts now be worth considering? Only if you were lucky enough to have made money from the morning rally.
Now a look just over one hour later. The markets aren't being kind to making this a profitable trade.
Things stayed relatively calm for the remainder of the afternoon with the 90 series of Calls closing at $.66 .
Here is it's one day chart.
How did the 91 series of Puts close? Well they would have made you money. Look at where they closed.
Can you now see how one day (Friday) options are better trading vehicles than two day (Thursday-Friday) options. With Friday options you have to dance to the beat a little quicker. The 1:03 p.m. offering of $.11 a contract on the 92 Puts was an easy on to pick.
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