How the hell is it December 2nd??!!
We’ve been living in lockdown hell and the time is still flying by!
How can that be? They say the older you get the faster time goes by, which I totally believe.
Remember those days sitting in grade school watching the clock ever so slowly tick to 3:00? Or counting the days until Christmas or your birthday?
The days seemed endless.
Now, the weeks just whiz past us. This is the 49th week of the year. Crazy!
IMPORTANT: You know, the clock is always moving against your long option positions, too. Options have an expiration day so they decay every day and that rate of decay is affected by the movement of the stock.
In a stock that is moving around a lot, the options will hold their value longer than if the stock is just sitting and not moving around so much.
I would like you take a look at this example of expiring options in a super volatile stock.
This is the chart of Fisker FSR, an American electric vehicle automaker.
*Remember those EV stocks have been hot!
The stock was flat from January to July, barely veering away from $10.00.
Suddenly in early July, it makes nearly 100% round trips…TWICE…through all November!
That is a wild ride!
Let’s take a look at the options. Since we are talking about decay, we are looking at the Dec4 expiration cycle.
PRO INSIGHT HERE: The first thing you look at is the at the money straddle. The stock is trading $18.17 so that would be the 18 calls and the 18 puts.
The markets are a bit wide, but the straddle is offered at $2.00 with three days to go.
In an $18 stock, this is very expensive, but if you look at the chart it is totally appropriate as the stock had a $2.00 range today.
What I would like you to do is follow this stock with me until Friday. Let’s watch and see how these options react to the stock movement and how the time premium will decay out of them.
Should be interesting and hopefully educational. Just don’t watch the clock!
Thanks for reading…See You Next Tuesday!
By the way, you can email me firstname.lastname@example.org with any observations you have on the stock. Also Mark’s encore event on what’s going to work in the market to end the year and how he’s nearly doubled his account in just 3 weeks has gotten rave reviews! I think it’s because he gave away so many goodies. Check it out here…
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