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Ford Calls and a Big Surprise.

Look at this Ford chart on July 1st. Now todays Call options. Every quarter these types of reports come out. This one was good. Watch for it Next July 1st. A $2.00 option went up to close at $37.00. In my introductory remarks to this blogging channel a few years ago I said many old farts driving Mustang convertables paid for them from money made on playing Ford options. This bounce today in the Call prices based on this good news report of rising sales was one of those events. Now this, the strenght continued into the following day which is Wednesday July 2nd. This is a short week for option trading with tomorrow being the last day. Action like this is extremely rare.
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The Relationship Between "In The Money" Call Options and "Out Of The Money" Call Options

Which are better to speculate in? Well lets pick a stock at at the close on Monday February 10th and look at how the options on it that expire on Friday in four days time have traded on the day. The stock that we will pick will have closed the day on the upside. Let's pick a stock which has options trading on it in one dollar increments. The stock we will be watching is Walmart and the option series we will be watching have striking prices of $101.00, $102.00, $103.00, $104.00 and $105.00 dollars. What is the purpose of this exercise? Well I want to point out the leverage that different series of Call options have. I also want to mention that the higher "out-of-the-money" options have a higher probability of expiring worthless than "in-the-money" or near to being "in-the-money" Calls. Catch the right directional move on the stock and watch the value of your "out-of-the money" options explode. In contrast, a Call option already "in-the-money" will also see an incease in it's value, but an increase not of the same magnitude. Now a one week and a one day look at the tradings of Walmart.
Now look at how the following four Call series on it traded on the day. The first series of Call options I will be showing are "in-the-money" followed by three series which are progressively "out-of-the-money".
What stands out to me with these numbers? The volume of trading in the Call options with a striking price of $103.00 good until this Friday. The logic is that Call options positions just above the previous day's closing have the most to gain from any upside pop. One of the problems for the existing option holders at this level is that there could be some upside resistance going into tomorow's trading session. This resistance could wipe out some of today's gains. Let's just watch and see what happens next. Now Tuesdays action. Much of Mondays gains were lost.
Are you able to see how the "out-of-the-money" Call options with the higher striking prices took more of a hit that the ones with a lower striking price. The 105 series of Calls now look somewhat vulnerable as they are getting closer to expiring. Maybe its time to say thank you and move on. Now a look at the end of the day readings on Wednesday. Call option holders should be happy.
Pick whatever series you were watching and see how much they have increased. I have blogged about these options all month. Now a five day look at Walmart. Notice the dip on late Thursday.
Any stock with a nice run up from Monday to Thursday morning is prone to a dip and buying Calls on a Thursday morning that expire the next day is most often a trap. The end.

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