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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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First Solar. $200.00 Call Options On Friday December 12th That Expired The Next Day On December 13th

Let's start with the price of the 200 Calls at 9:37:38 a.m. on Thursday morning. Only four contracts traded. These are Call options that will trade all day Thursday and all day Friday. That's about 12.5 hours of trading time. You can buy in and sell out whenever you want during the trading hours the markets are open or in the premarkets on Friday morning. Premarket trading show no bids or asks.
At $206.00 a contract (that's what the last option contract traded for at this time) they were still expensive. Now a look at the same options on Friday morning at about the same time in the morning.
The stock is up slightly but the Call options are down in price because half of the life of the Calls have disappeared. They are trading at $1.30. Thats a good example of why "two-day-out-to-expiracy" Call options can be expensive to hold onto overnight going into Friday's morning action. Also look at how far apart the bids and asks are. Why is this? Options makers are taking a defensive approach and are buying themselves security in case of any quick short term directional move. Other stocks that have options on them like Tesla have tighter bids and asks and they also have greater trading volumes and are more liquid. Not all option traders want to fight the battle of playing options on stocks with these wide spreads. Now this, a one day chart on how First Solar traded on Friday. I am kind of spilling the beans by showing you this.
Now this, a closing reading on the day. I am cutting out all of the mid day chatter. This option series is now officially closed out forever. The stock closed below the striking price so if you tried to sell them there would not be any buyers.
Yet we missed something in our watching of the now worthless Calls. Look at how the $200.00 series of Calls actually traded up to $4.70 a contract at one point in the day! That happened at 9:47:00 a.m. mark or only nine minutes after we saw it trading at $1.30! Do the math. 9:47:00 a.m. is only twelve minutes into the trading action. The one day chart above above will guide you in helping that the stock hit $201.50. That was it's high of the day and the Call options got a little bit ahead of themselves reflecting this excess exuberance in their pricings at that particular time. As in our Thursday's blog about the stock Snowflake, morning rallies upwards or downwards like this can happen in an incredibly short period of time. Trading in this space is not for the faint of heart.** Now a look at First Solar one week later, once again on a Friday. Here is it's one day chart.
Now here is how the the one day $175.00 call traded on the day.
Now it's five day chert on the week.
What a selloff it had on Thursday and what a partial recovery it had on Friday. First Solar is known to make bold moves.

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