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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 a freefall like we are having today might have no effect on the value of the Call you are trying to play. This is because 20% of your time value will be expiring on each day as we approach the Friday expiracy deadline.
It's still early in the morning and if there is going to be rebound it will not start to happen until closer the closing bell. Let's pick one more stock. First Solar. It has had a zig-zag trading chart as of late.
The Calls look somewhat expensive and there is a suspicious trade of 50 contracts but that doesn't bother me. One strong day of upward trading will bounce this stock back up. Tommorow is a new day. To be continued. P.S. The market is now down even more.
So what happened at the end of the day? Getting in to early would have bing a mistake. Monday morning selloffs usually don't end until the last hour of trading. That's what happened... look at these three situations.
...................
Caterpillar is only down a touch from where it was at 10:46 a.m. We also knew back then that it was to early in the day to look for a reversal. What about interactive Brokers and it's 155 Calls we looked at back at 10:53 a.m.?
There is not much change here from it's morning action. The markets closed the day in the following way.
If you got into any of these postions in the second half of the day today an up day tomorrow should help your cause. Flip back to my last blog and read about how Costco got crushed today. It was one we were watching. A Tuesday rebound! The light has turned green. Investors hate this up and down market. A look 40 minutes into the opening. One of the three stocks mentioned had a big suprise.
Caterpillar is always a difficult stock to play and here it is limping back up.
I like one month out options on reversals like this. This was something I was trying to explain and I mentioned the $9.00 number if it was to rebound.
Earnings and sales numbers are up. This was a nice suprise! These Calls are up from the $4.00 range yesterday. Here is how the markets closed the day.

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