Earnings Play Update - Ford
Unofficial Earnings Play Update - Ford (F) Hello Smart Option Sellers! Yesterday I offered up an unofficial earnings play on Ford. The thought process was that since they had pre-announced it was going to be a bad earnings report, we could take advantage of another large move like the one that had occurred just days prior. Buying an at-the-money straddle such as the $12 strikes yesterday for a mere $.32 per straddle is almost unheard of right before an earnings report. That is extremely cheap! It made a ton of sense to take a stab and buy it. Well, Ford didn't disappoint with the bad numbers - as their earnings were as bad as they said it would be. At the moment, Ford stock is down a bit from the levels where it finished the day yesterday. The stock is currently trading near $11.75 per share, with the straddle trading for about $.25 per straddle. That's a 25% haircut overnight. The best-case scenario is for the stock to keep dropping. At this point, you have two choices if you bought the straddle: 1. Unwind the straddle by selling it now at the prevailing price. This will help you salvage some money. 2. Hold for a bit and see where the stock goes. It might continue the downward path and turn the straddle into a winner. In either case, it is recommended to close the trade out completely before expiration tomorrow afternoon. You can sell the straddle as a single transaction just like it was bought, or you can "leg" out of it by selling each side individually as you see fit. I would be inclined to hold for a little bit to see where the stock goes. If the overall stock market sees weakness today, it can certainly carryover to Ford Winning through option buying is a tough gig. You have to be so precise with your timing, and of course the stock needs to move. This is why I believe in option selling as the best form of income generation, but it's always fun to take a stab on a quick trade like this as long as it's cheap. That's all for now. Let us know how you did (if you got involved). Continue to contact me here Regards,
Lee Let's Grab That Cash!