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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 Is One Of The Few Short term Option Trades Now Doable In These Markets. How and Why. Plus Costco

Doable means "within one's power". If you don't understand how to play Call and Put options yet, let me show you this. What is Walmart doing? It's selling food and soon may build new relationships with new suppliers. Change often comes at a price. Going forward will Walmart's profit margins get squeezed? That's the question. Look at Walmart's chart over the last year.
Now let's look at Costco.
What does that show us that is relavent to option trading? Well nothing really. It just tells us that these companies are not going to go away. Now if we look at their trading charts over the last five days will that information be more relevent? Maybe. I now offer you this material. A look at their five day charts.
Now Costco.
Does having access to these charts make you a better trader? Not really but stay with me. Now here is a tricky thought to digest. Everything you know about Walmart doesn't really have much revelancy when it comes to playing the daily options on this stock. That might sound odd to say. If you like the company and think it's going to do well long term then just go ahead and buy it's stock. Having good thoughts about how well Walmart might do in the future is largely unrelated to the ups and downs of it's short term option trading activities. Part Two. Trading Costco Calls. It's difficult to do because the stock is so volatile and it's options always seem to be so expensive. Here is it's five day chart and a look at the one day Calls on Friday, the day the stock had a strong upward move. Options on highly volatile stocks have to be priced defensively which scares away 98% of the retail option traders. It's not exactly 98% but it's a very high number.
If you subtract $17.10 from the $23.60 the number is $6.50. That would have the price on the Costco 970 series of Calls at the close on Thursday. That's $650.00 U.S. So it's a gamble on Costco going up to $976.50 on the day just to break even. What did Costco close at on Thursday? The number is $967.75 ($994.50 minus the $26.75). What this means is that the stock would have to up $8.75 in one day just to break even. Anything more than that becomes your profit. If you look at it's five day chart you will see that never happened in any one trading session in the preceeding four days to this action. The bottom line once again is that Costco options are near impossible to play. Also consider that Costco jumped up $26.75 cents on Friday which was a day when the DJIA average was down 521 points! If you do want to now jump in and play the downside here is how next Friday's (April 25th) 990 Puts on Costco closed on Friday, the day it jumped up $26.75. On the week it jumped up $31.09.
Costco was up once again $31.09 on the week. For these 990 Puts to break even the stock would now have to fall on this week's action $12.92 plus the $4.50 that they are "out-of-the-money" or $17.42 just to break even. You decide. It could happen. Part Three. Tinkering with Walmart options. I must sound like a broken record always talking about them. The cost per contract to trade them is so much less than Costco options. That is one reason I like them. Look at Fridays action. First it's one day (Friday) chart.
Now three series on it's one day Call options.
Here is where I want your brain to jump into action. Notice I am onto something that has a high volume of trading and recognize with the half dollar spreads on the option series the exercise of climbing the wall on these one day options becomes nothing short of a game as the stock continues to climb upwards. Going back about three years ago Tesla often seemed to jump like $15.00 on Fridays which let option players buy into the action multiple times on higher series of Call options as the day progressed and would make out like bandits. Part Three. The takeawy. Stuff like this might be diffucult to absorb in one reading. Walmart doesn't always go up everyday. My advice is to track the one day options on stocks like Costco, Boeing and Tesla next Friday (the one day option thing) on a hourly basis and see what they do on the day. Thats the first step in getting an appreciation for what might happen. Yet then again this is not something first time option players should be looking at. **** A Monday April 21st look at the 990 series of Costco Puts in thew first 30 minutes of trading.
Now this.
The bid and ask keep going up. Now Monday at the close. The 990 Puts were were tracking did very well. Nobody saw that happening. It's difficult playing the downside.

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