Towards Understanding The Usefullnes Of Long Term Call Options

What do you think of this chart? It's Moderna. It's going to do something but what is it going to do? Up or down and what time horizon should we be looking at? Should it be two days, a week or perhaps two or three months?

Here is the chatter about it.

Moderna got smoked and now its time to get over it. It's that simple. Here now is how it is trading the morning after.

For option traders this is kind of a "no win" situation. Yes it could move up but it could also start to waiver again. Stay away. Now Moderna on the following day. Here is a new chart to look at.

Here is what caused the dip. It has had a good run.

So now what? Maybe the longer term Calls? Maybe however there is a problem with them. Built into the equasion on both of these stocks is the mindset that they are both going to recover from these tumbles. Look at how expensive these two different series of twelve dollars "out-of-the-money" Call options are on Eli Lilly. It's ridiculous. An option strategists named Michael Schwartz with Oppenheimer recently was quoted in Barron's as saying "The market knows what the stock and options are worth even when you don't". I disagree.

So the question now is are there any good long term options to look at? Last year I talked about how long term Calls on Disney were a great play. The company at that time was in a state of reshufflement and the stock proceeded to move up nicely. Because Disney had struggled for so long the Call options on it did not command very much respect. Buyers who were buying the Calls at this time were well rewarded. That's not the current state of affairs with Moderna and Eli Lilly. The long term Calls on both of these two companies now come with the presumptions that upside moves are now imminent. Long term options work better on stocks where unforeseeable future events will be the catalyst of change. Let me offer you the stock Ford as an example. Here is it's one year chart.

Sales were up in November. It's a given that our local municipalities all over North America will continue to order more of their trucks going into 2025. Vehicle prices are still crazy high. Yes all we hear about now is how China and their electric vehicles are taking over the globe but thats not the entire story. There are still bright spots within the Ford lineup. Here is how it's one year Call options are currently priced. Talk about low expections. That's a good thing for option traders.

Now this a look at Ford's five day trading chart.

Why are we looking at this? Well can you see how Ford was trading at $10.00 only five days ago. If it ever rebounded back up to that level in the next couple of days or weeks these options would probabaly jump up twenty percent. In other words, "one-year-out" Call options on stocks in this price range offer amazing leverage. The fact that they are one year out doesn't rule out the possibilty that you could be "in-and-out" of them with a decent profit in a relatively short period of time. On a differing note, options on stocks in the five dollar range can sometimes suprise. Here is a stock I talked about before it had some big moves.

For now, stay clear of all Moderna and Eli Lilly Call and Put options. That plus learn to appreciate that long term options can be used for short term gains.