Yesterday the Ford call options closed at $1.85. That's a nice gain of +76 pct over less than two months. On June 16, these calls opened at $2.00 and closed at $1.90. And since I published that article, Ford stock went to a recent high of $11.50, up +17 pct from my recent article.

Now if you had also written the Jan-06 F $7.50 put at $0.55, you could have closed it at $0.20, for a gain of $0.35, which would have reduced your cost base of the $1.05 Jan-06 call to $0.70. That means if you sold the Ford Jan-06 for $1.90, your net gain would have been $1.20, on an investment costing $0.70, which is a 171 pct return over less than two months.

Now, as you know, my job as a writer is not to have you speculate in your trading, but to see how to trade effectively. With this example you can observe the effect of leverage. You can go back through my notes to see how I approached trading in Ford.

In fact you can read that Ford was really an example that my gravely ill Dad pointed out. It was something to discuss in a visit to his bedside.

I am writing today about Ford because management has once again in the past couple months cut its guidance and indicated it would trim staff. Ford like some other auto manufacturers is having trouble selling cars. Apparently the new profit outlook for 2005 is a range of $1.00 to $1.25, which means that at the current price of $10.69, F is trading at between 8.6 and 10.7 price-to-earnings.

The Ford numbers have changed significantly in the past two months since I wrote my article, so be careful.

Unfortunately, I haven't had the time to keep up to these things. But if you check the Daily data chart for F, you will see a very high peak to the RSI indicator that would have been encouragement to sell or think about selling your call option a couple days ago.

One further point about these technical indicators; the slope of the lines is misleading for the current period because it factors in the current price (decline in this case), and starts the (RSI) smoothing line headed downward before you would have recognized it. So don't go thinking that just because you see a peak, you would have sold. The reality is that if F were to jump $2 today (for whatever unfathomable reason), the current RSI line you see pointing down today would be pointing up instead tomorrow.

And you thought that only Kudlow likes to revise history? ;-)

So be careful when trying to interpret these technical indicators.

Just like Ford management gave you their best guidance a couple months ago, as a guestimate, so too are these technical tools for traders more art than science.