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Why Did G.M. Go Back Up Again?

It went up on a earning report. I talked about that in a recent blog. Now this. Traders are not getting excited about this opportunity of playing the downside. Analysis are all busy extolling the virtues of playing it's upside. $100.oo dollars a share many are now saying.Now this less than an hour later. With the D>J.I.A. down 221 points you don't know if it's going to drop 600 points. When you play G.M. Puts you have to get in and out as quickly as you can. The reason for looking at it this time is because the indexes were looking pretty ugly.
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Nvidia Has Two Day Options

Let's start with a printout of differing expiracy dates. That's something I never pointed out before.
Most stocks are not set up to trade this way. In theory this gives you more versatility in playing short term options on any particular stock which offers this feature. You can for example buy a Call option on Nvidia which expires on Friday and sell one that expires before that on Wednesday in the hopes that the stock dips on Tuesday and Wednesday and recovers on Thursday and Friday. What does this mean? Well purchase for example a Friday's Call for $4.30.
Then sell this Call shown below for $3.20. How much will this cost you? Well $430.00 goes out of your account (plus the commission) to cover the cost of the longer term option and $ 3.20 (less the commission) is credited into your account for selling the shorter term Call (which has the same striking price and which you hope sells off in price) for a net difference of $110.00 plus the two commissions.
Now it's five day chart as of Monday's closing. This chart is not something you would expect to see and castes a doubt on the exercise we are describing.
But wait. Why try and create such a complicated situation? One reason is that you are trying to create a situation where the time value works in your favor as you watch the short term Call option you are holding slip down in price while the longer term call option remains slightly more resilient to this movement. I will walk you through how this plays itself out. Now this. Look at todays action on the Feb 4th 190 Puts. Look at how quickly they went up in price at the very end of the day.
This type of a move challenges the wisdom of creating the complicated spread we have just talked about creating. To be continued. I will show you at the end of the week what ended up happening.

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