Grasshopper Trade and Message

The stock Ford (F) has been on a huge run lately. The company had been putting a dent in the Electric Vehicle (EV) market and they are looked at as a potential big player in the industry.

Watching Ford grow, almost doubling in the last, I decided to get involved. The big run has the Implied Volatility (IV) high and the premiums are ripe for selling. Today I bought 1000 Shares at $20 and sold the 4 day Call for a premium of 70¢. On the 10 contracts this gave me $700. As usual I hope to get assigned. If assigned I’ll make nothing on the stock sale because this is an At-the-Money Covered Call. However, the 70¢ premium is a return of 3.5%. This will be a return in 4 days.

I went with the At-the-Money Call because the stock has been on a big move so you never know when there will be some profit taking. If the stock pulls back a little at least I have a nice premium in my account.

 

Buy 1000 Shares F @ $20.00

Sell to Open 10 F 11/12/21 $20.00 C @ 70¢ (+$700)

 

This is a 10 contract Call. A Grasshopper can make a trade buying less stock and selling fewer contracts.

I know when it comes to mimicking my trades I sound like a broken record. I write posts like this to show you the homework I’m doing on the stocks I’m watching. Sometimes I get into a Grasshopper trade just for teaching purposes. And I know it sounds like a recommendation, but I’m really trying to show new traders the process and possible outcome. Sometimes I get into a Grasshopper Trade and it’s a very small percentage of my account, and that same trade is a huge percentage of your account. The trade might not be right for you. If the trade goes bad it won’t hurt me much and it might devastate a smaller account. You MUST find trades that fit into your own situation according to your account size and risk tolerance.

The bottom line is, if you only mimic other people’s trades you will never make money. You must learn from other, more experienced traders, but you must pick your own trades. If you’re not going to put the time in and use your own brain to figure this game out, you will never be successful.

So, with this Ford trade. Take a look at it. Do some work on your calculator to see what Strike Price and Expiration Date is possibly right for your account. Look at the stock. Do you think it will go higher? If so, maybe you would want to go a little Out-of-the-Money. Maybe a $20.50, or $21 Call would go better with what your homework leads you to see. Maybe you think the stock is going down and you want to do an In-the-Money Call for the bigger premium. Or maybe you just want to stay away. You must always do homework to see if you think a stock’s run is just beginning or it’s over.

Good luck! I am always available for questions via email.

 

Successful trading,

Steve

The Options Coach