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,