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How To Avoid Time Value Traps With Last Week Options.

This blog is not going to be an exhausting study of this topic. I just want to show you a few charts found in recent blogs and comment on which ones seem to skirt the issue of "time-value-concerns' and which ones don't. 1) Avoid Thursday at the close Call options. In this case Thursday is the second last day of the above chart. If you guess the wrong direction on the close it's going to be game over on Friday when the options expire. Thursday at the close on options that expire the next day are the biggest time value traps you can buy into. If the stock moves in the wrong direction it's game over. 2) Ford on a Monday going into Tuesday. On this chart April 13th is a Monday and Tuesday is the 14th. Can you see Ford closing strong on the close of the 13th? It would make sense to get in on the stong closing because these Calls would still have four trading days to recover if Tuesdays opening was not all that spectacular. 3) This time it's Caterpillar and it...
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Ford Puts - sometimes they will surprise!

Back to an old friend. This blog is about why trading stock options on the stock "Ford Motors" can suprise. It's also about trading options I call "penny like options". In this instance I am trading options priced at twelve cents. For first time readers that really means $12.00. Now, a one day and five day chart on Ford. Can you see how volatile the stock is as of late?
Now the five day.
Now a look at it's trading in the morning today up until 11:30 a.m..
Now here is my trading experience on the day.
20 contracts in at 10:05 a.m. at $12.00 each and out at 10:38 a.m. for $18.00 each. That's six dollars profit a contract. It all happened very quickly. Are you able to look at the chart above and see how the chart dipped during that period of time? If you don't play options and want to don't start by making trades like this. Well then again some traders only only make trades like this. It's not uncommon to see a $300.00 trade quicky go to $3,000. It's Ford. Times are changing and Ford feels it most. This leads to yet another point. Being a trader is not everyones cup of tea. Ford options are just something that most people would not want to be thinking about. Pity. ***** Yet another example. This time on a Thursday with one hour and eight minutes to go in the trading session. Take a minute and try to figure out what is happening.
Ford is up .12 cents on the day. Think of what would happen if it ever gave up this gain by the end of the day or on tomorrow's opening. Welcome to trading Ford options. *** Here they are seven minutes into the Friday morning trading session. Yes there was a profit to be made.

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