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Day Trading One Month Out Options. Learning To Skim The Tiniest Of Moves

This blog is different. It's about skimming small profits on one type of option in particular. It's also my story about how to make the time value of "one-month-out" options your very best friend. What I am about to try to describe to you is a phenomenon of wrongly calculated time values built into option pricings. Wrongly calculated from the perspective that some option prices (their "bids and asks") are over-sensitive to the tiniest of pricing swings. Who am I to make claims like this? What credentials do I bring to the table? I don't want to tell you as I want to keep my identity a secret. Let's just say that I have being trading options for a long time. Over the years I have learned that "nine month" or "one year out" Call options or Put options on stock's in the ten dollar price range are often mispriced. As example, I have followed the stock "Ford" for like forty years and to me it's January Call options a...
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Lowes / Apple

The first trading morning of the week are always difficult to play because the premiums on Call and Put options which expire on Friday are always excessive. In this instance Monday was a holiday so today, Tuesday was the first day of the week. I found myself focused on 'Lowes' because it was dropping in price when everything else I usually follow seemed to be going up. I had played it last week. Here is what I did.
In at 10:53 a.m. at $4.06 and out at 11:53 at $4.63. A one hour trade. Here is it's chart, I caught the rebound.
What was odd about this trade? Well look at how few contracts traded early in the morning.
Only one contract traded in the first ten minutes of trading and at 10:53 a.m. only two contracts had traded. In total there was only thirty five outstanding contracts. What a crazy low number.
Contrast these open interest numbers and daily number of contracts traded to the action on the day in "Apple". The numbers you are about to see are shocking.
63,361 contracts ended up trading on this series of Call options in one day with an open interest at the end of the day of only 4,565 contracts. So many traders are making this series of options as "go to" options looking to capitalize on daily market swings. They are inexpensive, move up and down quickly and offer instant liquidity. Playes sometime purchase them in quantities of one hundred or more at a time. Here is "Apples" one day chart.
I did a feable trade in it and got out and broke even. it's all about catching an interday swing and getting out. Here is how they traded on the day and here is what did. I was lucky to get out and call the trade a wash. It ended up closing lower.
The takeaway on all of this is that traders are now using "Apple" Calls as a trading vehicle in a big way.

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