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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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Young People And Options

Let me spill out some information. Next-Generation Investors Are Different. An organization called "Finra" published this information. In a 2021 survey the Finra Investor Education Foundation found that 36% of respondents aged 18 t0 34 said they have traded options. That compares with 21% of respondents ages 35 to 54 and just 8% of respondents age 55 and older. Then there are crypto investors. According to something called a Pew Research survey based on Feb 2024 data, 42% of men aged 18-29 have invested in, traded, or used cryptocurrency compared with 17% of women in the same age range. Interestly, just 17% of all adults say they have invested in, traded, or used a cryptocurrency, according to the same 2024 survey. When it comes to buying on margin,in 2021, just under of a quarter, or 23%, of investors ages 18 to 34 said they have made purcheses on margin, compared with 12% of respondents aged 34 to 54 and 3% of respondents age 55 and older. Opening accounts is now easier and there's an explosion of new sources of information and social networks that can encourage risky behaviors. Let's not forget the recent frenzy of meme stock trading. Robinhood knows all this and works in this space.
Look at how it's stock has traded in the last one year.
My point is that young people are experimenting with option trading and the trend is only going to continue. Pick twenty or thirty stocks and just watch them for a few months. Write down turning points you see happening and check out how much at that point in time a Call or a Put costs on any series you pick. Then check back later to see if you were correct in making such a call. Option trading, unfortunately is very much a self taught process.

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