For those of you that hadn't heard, my wife Sylvia gave birth to our son, Ethan on May 17th. For those of you who are parents, you know the sea change my life has taken...for the better! Now that Ethan is starting to sleep longer, and by association, his father, I'll be able to get back into the blog. So, check back here to see any updates, and be sure to make any suggestions for plays.
A Valuable Lesson Learned
Recently, I had a position in CAT which reported earnings on Friday, which was Options Expiration Day. In hindsight, I missed a GOLDEN opportunity to make a LOT of money with limited risk. How? By playing a July $85 Put on Thursday. The high on thursday was $87.00, and you could have bought an "expensive" July $85 put for $0.85. I say expensive since $0.85 seems a lot for a stock that is $2 OTM. Anyway, for a one day play, it was "cheap" in the sense 10 contracts was worth $850, but if the stock plummeted, you could make a bundle.
So what happened?
CAT tanked over $7 at the open (and was down over $8.00 at one point) and the July $85 Puts went from $0.85 to over $6.00! That is a 706% return in one day!!
What's the lesson?
Perhaps next earnings season, you may want to see which companies report on that Thursday, and see if there are some "cheap" Puts/Calls to play for October's expiration? Just an idea...I welcome yours!
As an aside, you'll note the PERFECT bounce off channel support...
Happy Trading!
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