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Margin requirement for option positions and margin borrowing are two different beasts.

Stating common knowledge does not change the fact that buying exorbitantly inflating IV is swimming upstream. As a general rule, it's a really bad game plan.

All I have to offer you at this point is an eye roll for believing that IV is irrelevant for a long straddle when IV is going to crash from 100 to 20 overnight (eg. FDA announcement) and the value of the straddle is going to drop 75% from that contraction. It is far from irrelevant.

Props to you for being convicted enough to be willing to lose 75% of your large long premium in minutes to hours.

spindr0 said: "I'd take a look at selling OTM bearish call spreads to fund a portion of the cost of a long protective put. No cost if you lower the put strike." fgopc1 said: "Ya, this was also mentioned in a sibling thread. It is a solution if I'm stuck with margin, but it pretty costly...

It's clear from reading your replies that you have a good handle on the possibilities so I'm not going to take a deep dive into analyzing the what ifs. You've already done that. Plus, all of the choices makes my head hurt :D Speaking in general terms, each defensive strategy has its own R/R...

I can only surmise that because Cuban could only utilize an index where Yahoo was less than 5 pct of the index that there were other SEC restrictions during the lock up period. As you suggested, it would make more sense to take a hedging position in Yahoo for direct correlation.

During the lockup period, Cuban crafted a synthetic index hedge (where Yahoo was less than 5 pct of the index). When the lockup ended, he put on a zero cost long stock collar. I don't think that Mark Cuban's approach applies to your scenario because I'm inferring that you don't have the...

Anything is possible. But is it practical? I think not. If you believe otherwise, we agree to disagree. The short answer is that in this particular case, if a binary event is going to drive premium down and possibly toward parity, it doesn't matter what the vols are. All that matters is...

First off, the PTLA example was in response to the claim that buying a straddle before a 180 to 55 IV contraction might be sensible. I have no idea if the short calendar would make sense because one has to see premiums and I don't have access to historical option data. Be that as it may, why...

A covered call is synthetically equivalent to a short put. Selling puts may reduce frictional costs if the underlying cooperates (you pay fewer B/A spreads and fewer commissions). Covered calls and short puts have an assymmetric pay R/R. You bear all of the risk and you only have the...

That sounds good on paper but in practical terms, it's a fool's errand to buy an expensive straddle that's going to lose 75% of its value overnight due to IV contraction. Binary events are unpredictable and expecting the move to be more than enough to make up for that high debit paid is more...

Percent drop would vary across strikes and expiries but percent is meaningless. It's a Pyrrhic Victory to make 95% of 20 cents and lose 50% of a dollar. GLMD is up $11 to $18 this morning from an FDA approval. I was hoping that it offered options to demonstrate this but it doesn't. Perhaps...

Regardless of the vols, the further out premium will be greater. If a binary event occurs with a large move in either direction, the respective options may reach parity. In that case, do you want to be long or short the higher priced option? In addition, when vols get crazy, further...

If you have a crazy IV of 75 or 100 just before a clinical trials release, would you be willing to pay that kind of price for a strangle or a straddle, knowing that post news release, IV might revert to a historical range of say 20-30 ?

Where were you all of these decades when I was trading backwards??? I'm a new man! Tomorrow will be the first day of doing it right. :D

No, the extrinsic value of a LEAP is NOT the sum of expected extrinsic value of a monthly rolling position at the same strike. And no, there is no arbitrage opportunity because you aren't locking in a gain. However, there is the possibility of taking advantage of the disparity in premium...

The straddle is more profitable ($44.39 versus $33.87) ROI is better for the strangle.

For a big move, a strangle might blow the straddle out of the water in terms of ROI but not in terms of $$ profit... unless there was a distorted IV smile causing the straddle to cost more than the strangle premium plus the difference in strikes of one side (the vertical). Theoretically...

Here's an atypical use for a calendar. Suppose there's a looming binary event (clinical trials?). Large move expected. Direction unknown. IV is huge across all strikes. Sell the calendar. Large IV contraction wins. Big move wins. No move and no IV contraction loses. Delay of...