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Can we break this down a little further? Let me give you a real life example to give it context. Today DXC traded 2,700 options today. It just had it's earnings. The avg absolute moves over the past 10 quarters is 3.87% yet the front month option was pricing in a 7% move. I was able to sell the...

In liquid underlying's the price of the options before earnings are driven by supply and demand. Let's say a non liquid underlying before earnings. Where only 100 contracts are sold. How do market makers price the earnings event vol?

Robert I have a question for you since you used to make markets. I am trying to buy/sell straddles across earnings and am starting to develop a model to give me some sort of edge. I am curious on how the market makers price the earnings event for illiquid stocks. In your experience how would you...

When you say forward vol. Do you mean future implied vol? Because realized vol would hurt a calendar spread

Santa I have been putting alot of thought into your statement vega "gains" must out weigh your gamma "losses". So our vega gains will be IVT2*VegaT2 - IVT1*VegaT1. Assuming we do an ATM calendar where volga and vanna are both 0...what am I looking for??? Like how will i be able to tell that the...

You are a jewel!!!!!! Life just got that such clearer. Where're you travelling to?

Okay this is what I have come up with for when one should initiate a calendar. Lets say BABA has their earnings in a month and today the implied move on earnings is 2 standard deviation below the mean expected move. I could sell the weekly in front of the event and buy the event vol. OR I could...

That's all I'm looking for. The thought process on a trade

I understand, but I was wondering if you could give a specific example of when you traded the spread. Did you delta hedge etc...

Thanks for the reply. A spread on implied vol. Ie a dispersion trade, calendar trade etc...

Also thanks a great deal for posting that spread sheet. I will review it in detail when i get on a computer

LOL tom I read it a few times!!!! I was just a bit confused. So let me ask a more specific question about your post. I wish to write next week expiry on spx. So far so good. Now I look at all the other maturities on SPX. And graph multiple calendar spreads. I am still not sure what I am looking...

Normal term structure is upward sloping and vol is mean reverting. So when vol spikes and I buy a calendar because the term structure is inverted, I find the calendar losing money on both gamma AND Vega because the back month vol (most of the Vega) decreases, and the relief rally kills me...

Do you do any spread trading? Can you give an example of a spread you did recently? Vol wise not direction

Why would someone not care about pricing? Can't you say the same for the less liquid exchange markets as well then?

I'm thinking the real money in options is trading the spreads of vol either within the same asset or cross asset

Leverage = more variance in pnl. Plus I could use stock futures, margin, etc for leverage

Hey everyone, when we look at the correlation between price and vol it is very close to 1. So if I think vol will expand I should also beleive the stock will move down in price. But if that's the case I might aswell trade the linearity of the underlying. I know options give you convexity but if...

This makes perfect sense, thank you Kevin

Could you give me an example of a time you put on a calendar spread?