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No I don't. If you were not so busy trying to be a smart ass, you would understand that I am talking about spreads that keep being more profitable (or at least neutral when your profit gets capped) as the stock keeps going in the same direction. What happens when your underlying goes from $115...

Good for you. Your life must be very sad for you to spend your time attacking and insulting people on a message board.

I think you know exactly what I mean, no need to be a smart ass. The goal of a butterfly is to achieve a price target at expiration, or be as close as possible to it. if you don't see the difference between this and a truly directional spread such as a vertical, then you are right, ignorance is...

??? A butterfly is not a directional spread.

Mushin, I take care of the "FDA, earnings, bad news" with money management/ position sizing. It is part of my directional strategy, the most important part in fact. Doing a vertical spread does not eliminate this risk, and certainly in no way that position sizing can't deal with. I think it...

asap, my strategy with the spreads would be to do it with Leaps, as you are right, I don't know when the move would happen. Anyone here doing this kind of trade? I have done calendars when I buy Leaps and sell front month every month. Many times the sale of the front months, every month, allowed...

MTE, what I meant was rolling the short call to a higher strike as the price of the underlying approaches the strike, to keep taking advantage of the move.

Great post asap, thank you for the comments. I guess, as I am a trend follower, the elimination of Vega risk is not important for me as I like to play DITM options and hold them for sometimes up to 2-3 months. As my strategy is based on having some very large winners once in a while...

I never understood why people would even consider simple 2 legs vertical spreads. What are you trying to achieve? Reduce your cost? Just buy less, or have tighter stops, at least you will keep all of your upside potential. Trying to capture some premium? Then why enter a directional trade where...

You know what I mean: they estimate future IV's and P/L depending on the move of "entire IV" that you anticipate.

Rallymode, TOS can model each strike independantly. Just click on the wrench and then on "more". Anyway, for those of you interested, I just had a long chat with TOS's support, and they confirmed what I was saying: Their model accurately predicts future IV's and P/L EXCEPT around...

In other words, given a fixed drop in IV, options with higher vega will drop more than options with lower vega, HOLDING EVERYTHING ELSE CONSTANT --------------------------------------------------------- Well, that was difficult, but I am glad you are finally agreeing with me on this one.

TOS gives you future (or "theoretical", are you playing with words, I am sure you know what I mean) IV's. How do you think they are "calculating" them?

MTE, you already said that, and I understand that different months have different IVs. In fact, read my thread about "BIDU earnings" and you will see that I explained how to model this in TOS. This is not the point here. I am going to ask one last time, and then I will just give up, as...

To answer some of your replies: I know that IV calculation does not include Vega. BUT how do simulators like TOS calculate future IVs? You enter the percentage drop that you expect in IV and they model future IVs, and thus future P/L. How do they calculate this? My understanding is that they...

Vega is the amount by which the option price changes when the implied volatility changes. I think we should all agree to this. So if there is a volatility crush, the premium on the options with higher vega will go down more than for the ones with the lower vega. If IV drops big, options with...

I am still holding here, at a loss as well. Stock unchanged is worse case scenario. I have not had time to review IV crush yet.

Yes, I am short the June's because of high Vega. Anyway I wrote down all IV's so I can compare tomorrow. Did the same for HPQ.

I am not mixing volatility with Vega. I understand what Vega is. - Vega is higher for back months than for front months. - It means that options in back months are more sensitive to IV crush than options in front months. - However, the day after earnings, you can notice that front month...

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