Option contracts on the auto industry

Yes, this a forex forum, but I don't use any other financial forums, so hopefully this one can slide under the radar.

Last week, my uncle clued me into Ford, trading at 1.50.... and what did Obama say? "we can't let the auto industry fail." Sound like a bailout in the making?

In fact, Ford is trading above 2 dollars now, with anticipation of a bailout.

The very high risk / high reward trade is to buy CALL options on Ford (I will probably use 4 month options, to avoid time decay.)

Anyone not well versed in options should take a crash course in it.... it gives you very high leverage, much like forex. For example, the contract you buy might have 15:1 leverage or higher.

It is very risky business, but a smart trade can reap huge results.

I just went ahead and bought GM and Ford outright in my IRA. It's not very far to zero so I won't lose much (actually I won't lose any cause I won't sell)
and the 20 year upside is quite large as long as they don't go completely under. I was thinking of buying calls, but I'm going for the lower risk on this investment (I say investment because I see it as that and not a trade) I have never had good luck with options whereas I generally do great with normal stocks. So I will stick with what works for me. Good luck with your trade. Anything else we should be bottom picking?

Kinda suprised nobody else commented.

I bought GM and Citigroup call options for Jan of 10. Already up considerably. I wish I had more money to invest right now. This is prime time to buy.

Goodluck that what i am planning to do , but maybe buying stocks cuz options is expensive these days i will c

I bought some deep out of the money puts on United Auto Workers

It's good to see you're using derivatives well.

I've held 1 year straddles on just about every major banking, oil, and auto stock since Bear Stearns failed. Volatility plays are great for this kind of stuff, and if you can learn the profit curves for options, then you'll be able to pull plenty of money out frequently from the stock market, all with limited downside.

Hey guys are you using any special platform for trading Forex options? I am not familiar about call/put, so I would sure appreciate you sharing strategies on how is your perspective trading option. Thanks in advance

I imagine you've got a pretty wide target box value to work with thanks to the volatility. However, I bet you paid a good sum for the premiums for holding it that far out?

RE: Prior post:
http://www.forexfactory.com/showthread.php?t=103881
did you ever get a solution to this?

I paid a moderate sum. When I go shopping for straddles, I look for options which are priced in such a way that a 5% move in the underlying stock's price puts me at breakeven. Such deals are very rare mind you, I didn't buy those year-long straddles all at the same time. As with forex, I waited for a proper entry point.

That would be the rundown I was looking for. 5% movement with this volatility shouldn't be a problem, especially with some of the really cheap prices being listed by certain stocks.

I got burned on this trade.

I've been buying calls/puts and writing calls on GM for awhile now...back when they bounced between 6 and 3-4...i'm waiting now to see what the new year does to the stock before i make any more short term trades.

Over a longer perspective, i'd buy puts. I believe a structured "bankruptcy" is inevitable, most likely government assisted. I also believe future bailouts will be necessary and will drive the share price down even more. In addition, these bailouts will have the ability to dilute equity substantially.

There are 3 scenarios: go down, stay the same, go up. Of those 3, i only believe the first 2 to be likely in the next 2-4 years. For the share price to go up, GM will need to increase sales which will require an economy turnaround as well as a restructuring of operations. Lets face it, there is no way a restructuring can occur any time soon. Just by the nature of the business, a restructuring will require time and money: 2 things GM doesn't have. Not to mention their wonderful management...

I don't want to get into a whole thing here...but the last thing i want to say is that i believe it's too early to be calling up or down. While i think down is the best bet, we'll see a movement in either direction that will make GM's fate clear. I'd rather catch 40% of the movement than commit under uncertain terms.