27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.
On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.
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Premarket price action can be deceiving — but if traders incorporate factors other than price into their analysis, it may lead to better trading decisions.
The premarket price action on Thursday in Ford Motor Company (NYSE:F) and the sudden reversal in the regular session make it the PreMarket Prep Stock of the Day.
Recent Ford Price Action: Ford had one of its biggest upside move in years from May 25 to June 4, when it rallied from a daily low of $12.80 to six-year high of $16.46. On a closing basis it was $12.81 to $15.77, or a 23% gain, which is sometimes how much it moves in a year.
Since making the high, Ford has been lower in eight of the last nine sessions, including the day it peaked, falling to $14.76 on Tuesday and ending Wednesday’s session at $15.02.
Obviously there has been some serious profit-taking that has created major overhead supply.
The 'Good' Ford News: Although there was a slew of headlines on the company before the open Thursday, the one that the traders and algos reacted to was the first: Ford's forecast that second-quarter adjusted EBIT will be significantly better on a year-over-year basis.
The company cited strong new vehicle demand and improvement in Ford Credit as a few of the reasons for the higher guidance.
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PreMarket Prep's Ford Price Take: When the issue was being discussed on the show Thursday, it was trading higher by 40 cents — which would represent a big intraday move — at the $15.40 area.
The "PreMarket Prep" co-hosts were cautious on whether the issue could maintain or improve on the gains for one main reason: the resting orders to sell in the NYSE Openbook.
This is a market data subscription offered by the NYSE that provides a real-time view of the exchange's limit order book for all NYSE-traded securities and that lets traders see aggregated limit-order volume at every bid and offer price.
For such a thick, low-price stock such as Ford, many of the large institutional orders are stacked at the even (.00) and half levels (.50).
In this instance, there were large sell orders stacked at $15.50 and just above and below. Therefore, it would take some huge buyers to take out the sellers after a big move already.
A more detailed explanation on the importance of the NYSE Openbook can be found here:
Ford Price Action: After its opening print at $15.30 Thursday, Ford made only one attempt to take out the large sellers at the $15.50 level and really didn't come close. In fact, the issue only reached $15.40 and sharply reversed course.
As of 2:30 p.m. EST, Ford had made a new low for the recent pullback at $14.56 and was attempting to get back to its closing price of $15.02.
The stock ended the session lower by 1.66% at $14.77.
Disclosure: "PreMarket Prep" co-host Dennis Dick is long shares of Ford Motor Co.
Photo by Dave Parker via Wikimedia.
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.