Featured

The Hint Of Inflation and Eli Lilly

It's Thursday morning and the markets are yet to open. Everything is soon to cost more but not yet. It's the "not-yet-markets' option traders find themselves trading in. Walmart is proudly advertising grapes are on sale. They want your business. We all have to go on living and we all have fears of getting hit by Donald Trump's hammer. Are car prices going to cost more? Who now has extra money to go to Disneyland? Should we be stocking up on plastic flower pots and party supplies from Dollarama? The markets sold off yesterday and tomorrow the markets will be closed for "Good Friday". In the futures market this morning at 8:17 a.m. the DJIA is down 588 points while the Nasdaq is up 172 points. Perhaps there will be a reprieve on the tech stocks today. The little fish like us trying to play options in this environment have lost our appetite to trade. Throw in $500.00 dollars and it's lost in a couple of days. Eli Lilly is expected to open like $80.00 hig...
Post a Comment

Tesla Options With One Day To Go

Tesla jumped up $50.00 in one day this week. On Thurday at the close here are the premiums on two series of Tesla Calls and two series of Puts that expire tomorrow (Friday) going into the mornings action. First a look at how the markets closed on Thursday.
First the Calls. Tesla was down $19.80 on the previous day so a rebound of some sort might be expected.
Now the Puts.
I understand the high open interest numbers on the "out-of-the-money" Calls. They offer leverage if Tesla decides to bounce five or ten dollars on the opening. It often does. Eveen a five dollar bounce on the opening would move the needle upwards on these Calls. Now a look at it's five day chart.
So what happened on Friday morning?
By 9:53 a.m. the 252.50 Calls had jumped up to $8.05. They closed the previous trading session at $6.24. Not much of a gain but enough to illustrate thats what can sometimes happen with one day Calls on Tesla going into the opening. As we will eventually find out that proved to be their high of the day.
Now here they are again at 10:57 a.m.
This takes us now to the Telsa 252.50 Puts which are up only marginally.
Can you see how low they traded on Tesla's small morning bounce. Let's cut to the chase and see how these options were at a 3:00 p.m.
Now the 252.50 Puts.
They did hit a high of $11.40, up from the previous close of $6.25. The 245 Puts expired worthless and the two series of Calls we were watching also expired worthless. The markets at 3:18 p.m. as I write has the (the DJAI) up 652 points. So to recap, Telsa opened stonger on the opening and the $252.50 Puts traded down to $2.93 and then jumped up to a high of $11.40. That's the trade of the day. Here is a chart of how Tesla traded on the day up to $3:40 p.m.
So in at 9:47 a.m. and out at 11:20 a.m. or out at 12:27 p.m. Either way would have netted about the same thing. One has to see the big picture to profit on these price swings. The exercise of Friday option trading (it lasts 7.5 hours with a "get-out deadline" of 3:30 p.m.) is the name of the game for a small number of nimble option traders. It's more difficult to do than it looks. *** Tesla came back in the last thirty minutes to close totally flat.
This kind of action happens every Friday.

Comments

Post a Comment

Popular posts from this blog

Living on Kraft Dinner?

Image
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 ...
Read more

The Little Engine That Could

Image
Walmart again. It's all I seem to blog about. Here is it's five day chart. The stock keeps going up and the option series are set up in one dollar spreads. Even a fifty cent move on the stock moves the needle on these Calls. Look at how this series of Calls was trading yesterday at 3:00 p.m.. Now here is this same series of Calls just before noon today. Thirty days of upward action like this punctuated by the off day of decline. Now notice the higher volume of trading in the series of Calls with the higher striking price. These are the ones's with more leverage. At the same time look at the five day chart on Costco. The two stocks sometimes trade in tandem. Humpty dumpty sat on a wall .... a had a great fall. Someday soon a fall might happen but what a great ride it has been.
Read more

A Fireside Chat - One Year Options and Thirty Day Options. Which is Better?

Image
Some say to think small, not big. Trying to play Disney options is thinking big. It is a stock slighty out of favor. If we start with it's a three year chart, we will see it is down by about 50% over that period of time. Now it's one year chart. If the stock can break 110 in early 2024 the sky is the limit. It does have a lot of moving parts so anything could happen. Look at these Calls options one year out. One year in options buys a lot of time.They look reasonable. If the stock ever inched up to the $105.00 price level in the three or four months these options would jump up in price by about 50%. Even more if they had really good news. Yet it's the "what-if" aspect of the equation that castes such a trade in doubt. "What if" stories just don't cut it. There are to many variables in play. Then again, why are we even thinking of long-term Call options after a December's rally? Let's switch gears. If consumers are out spending for X-mas...
Read more