A Trade for next Monday.
- Thread starter TimtheEnchanter
- Start date
I am not sure what you mean?
What is the point?
I think this merits a bit of elaboration...IV crush is irrelevant if held to expiration. Op mentioned exiting after earnings but before expiration. IV frequently drops after the earnings announcement, so a big crunch could adversely affect the position. Also, your theta decay on this position would be horrendous.
Market makers make their monies keeping the bid and ask spreads as wide as possible. In some cases, you end up losing monies when you had a small profit at the time you were trying to get out. I usually, wait the very next day. The reason is they are bidding down the prices, the next day, they would be bidding up the prices on those same options to sell it. Might as well be on their side, would be more advantageous to us.
I don’t know how anyone could say its irrelevant when it’s a trade through earnings.
If you hold the options all the way thru expiration of the contracts (i.e: 1:15 PST on July 24th), it's irrelevant. The profit/loss will be based purely on the intrinsic value of the position, which depends only on where the price ends relative to the strike.
Up until that time, it is absolutely relevant. However, at current Vega levels, I'd be much more worried about theta than IV.
Up until that time, it is absolutely relevant. However, at current Vega levels, I'd be much more worried about theta than IV.