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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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"Ford Motor Company" Blogs are Always the Easiest to Understand

PART ONE. It's a company that makes cars and trucks and the stock currently is at around $14.00 per share. Sell more vehicles on a monthly basis and the price of the stock will go up. That's pretty simple. Now read this latest news.
So was that all good news or bad news or a combination of both? Sales were down annually over 7%. Remember also how many of the previous news releases talked about a high number of trucks sitting in parking lots waiting for a few final parts before they can be shipped out. Here now is a look at the 14 series of Calls which will expire in five trading days.
They are trading at 20 dollars a contract so the break even number at the end of the week would have to be around $14.20 per share. PART TWO. I played the same series of Calls last week, buying them at 9:42 a.m. last Monday morning. Here are the two fills. It's about the same price now as it was last last week at the same time.
Now to answer the question of how I did. I was offside big time on Monday, Tuesday and Wednesday but Ford popped Thursday morning and I got out ok.
Here is its five day chart. Imagine buying in on last Wednesday afternoon instead of on Monday morning like I did and getting out when it popped the next day!
Part Three. Here now is how the same series of the fourteen series of Calls closed out last Friday Dec 2nd. They were worth nothing because the stock closed under $14.00 a share. Can you see how highly leveraged these options can be? Part Four. Can you play options on Ford and continually make money? No. The stock wanders. They are however interesting to play on news releases and around earning seasons.

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