Ford Stock

What attracts me to start trading an option? Well, first off, I like to see the stock in an uptrend. There’s no rule that says you have to trade only up stocks and options, its just a matter of personal preference. My ability to ride a short lasts shorter than my ability to sit and watch Dancing With the Stars. In other words, about three minutes. It’s just not for me.

Secondly, I prefer high price to low price names. And thirdly, I prefer higher volatility to lower. Then again, what option trader doesn’t? The higher the volatility, the better the opportunity.

Given all that, I present Ford (NYSE: F). Stock in a downtrend, priced with a full of 16, and options volatility near 52-week lows. Almost exactly the type of stock that never crosses my radar. But hey, its in the news a bit, so lets take a look.

With the stock gapping down, then treading water under the 20-day and 50-day moving averages, I really don’t see any reason to rush in and get long. And with the options so dollar cheap, nothing gained getting too fancy either. The  May 16 line gives you a quarter to play with, and doesn’t charge much for it. The calls closed at $1.17 and the puts at $1.06. Gun to head, I would take the Bear bet here. But not right this moment. I’d look for a move into $16.50 or so and buy the F May 16 Puts a little down from here, maybe in the 90 cent range. And after that I’d look to eventually short F May 14 Puts against them, likely in the 30 cent range, and turn it into a Bear put spread.

I should caveat all this with the fact that I don’t do fundamentals. I have no strong opinion about future auto sales, Ford’s product line, or really anything like that. I do look at charts, and lean positions accordingly. And I don’t call tops or bottoms.