Your thoughts about penny options?

Question

right now ford is at 6.27...june 08 calls @ 8 are bid .01, ask .02

expires in 6 days

$1.25 per contract commission

would it be a horrible idea to buy in?

what are the chances of 100% loss COMPARED TO 100%,200% gain?

anyway, what is your opinion on this

Answer 1

Amount?

Answer 2

They're called penny options because they're worthless.

Answer 3

don't spend too much time on penny stock

Answer 4

It would not be a horrible idea.  It would be risky, but not nearly as risky as a "no name" company.  The company "FORD" will survive no matter what, so your risk of complete loss is minimal and the upside is considerable.  Just make sure you have the capital to sit on the sideline for at least a year or two in the event it goes down further until the turn around.  Ford is cutting operating costs considerably, and focusing on their fuel efficient models in the coming years, so they are beginning the "turn" in the right direction, but consumer acceptance will be the key.  FORD will be around forever in one way or another, however.

Answer 5

What you're doing is a typical mistake of new option investors.  Options may appear simple but they are very complicated. Theoretical pricing is based on the "Greeks".

If you don't understand "the Greeks", this shouldn't be an investment for you.  In fact, the reason these options are so cheap is that the theta is almost 0, the Vega is almost $0 and the probability is less than 1%.   Just send me the money..... better in my hands than being thrown away.

Answer 6

It may be a good idea. But only buy as much as you can afford to lose. Your chances of 100% loss is very high. 200% gain? I don't know. It depends how quickly F will jump up. If it jumps to $7 on Mon or Tue, then yes, I think, you could double your money... It depends how the market will react next week. Note that DJIA is at or NEAR support right now, so it could jump up a little on Mon & Tue. I can't really predict the market, so I can't tell you what the chances are...

Answer 7

To buy the option you will have to pay $2.00 + $1.25 = $3.25 per contract. To sell option you will have to pay another $1.25 making you total cost $3.25 + $1.25 = $4.50. that means to sell the option for a profit the bid must go up from $0.01 to $0.05,a 400% increase. To make a 100% profit the bid will have to go to $0.09, an 800% increase. To make a 200% profit the bid will have to go $0.14, a 1,300% increase.

<<<would it be a horrible idea to buy in?>>>

Yes. you have much better odds of making money buying a lottery ticket.

<<<what are the chances of 100% loss COMPARED TO 100%,200% gain?>>>

At least 100 to 1.

<<<what is your opinion on this>>>

It is a horrible idea.