Five Common Mistakes "One-Week-Out Options" Traders Make.

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If your a frequent option trader making 25 trades a week you will say that everything I am about to say is totally useless. My five points mentioned below are for the "everyday traders" who who have their favorite stocks to play options on. 1) Placing option tickets on Monday or Tuesday morning that expire at the end of the week. Don't do it. The premiums tend to be expensive. 2) Don't find yourself in a postion of sitting on five contracts on let's say Disney to go down in price before Friday, five contracts on Boeing to go up in price and a couple of option positions on two different oil stocks. Time value will beat you up and you will probably get them all wrong. 3) Avoid in general one week options on stocks priced in the $20.00 and $30.00 range. Options on stocks in the $200.00 or higher price range have a feeling of moving more and for that reason tend to be a better play. 4) Avoid buying options in the last 2:00 minutes of Thursdays close, looking for a Friday morning opening bounce. 5) Don't play short term one week options on stocks showing a chart pattern of being in a cup formation. The game of waiting for something good to happen doesn't work with soon to be expiring options. Now a recap of three thinge we talked about last week. 1) Ford. Look at it's crazy five day chart.
I did a blog last week saying to buy a "one-week-out" Call option and a "two-week-out" Call option. Go back and read what happened. 2) Now a look at Caterpillar. Look at how it rebounded on Thursday afternoon. When it jumps it can jump and the play of the day was to buy a Call option on Thursday's close and jump out seconds or a minute or two on Friday's opening.
Here is how the Calls jumped on the opening.
"In-and-out" in a couple of minutes resulting in a doubling of price. It was a Friday morning and this "must-get-out-trades" is one of the most reckless trades to be making. Now this. A sixth common mistake many traders make is not to be thinking enough about nine or twelve month out options. Spend more time tracking them. A nine month out option position might go from $1.20 to $1.65 in thirty days. My point is that option traders should learn to make long term option trading a greater part of their focus. It often happens that's where forward thinking traders make their easy money.

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