Advice from opton traders

Quote from gkishot:

Based on your claim that further out options are not cheaper than the price of the front month option in order for me to compare I need to know how do you calculate the monthly cost of the further out options.
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I don't calculate the monthly cost. Maybe I used the wrong words to make my point, but at the end of the day, a further out straddle is gonna tie up more capital and it is gonna be a lot slower than the front month so it is still hard to make any money on it from the earnings move.
 
Quote from MTE:

I don't calculate the monthly cost. A further out straddle is gonna tie up more capital
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But it does not mean that they are not cheaper though in terms of their monthly cost.
 
Quote from palawan:

is there a third, yet? coz i'll 4th this :D

i also paper-traded straddles earnings and it lost moneyl. very recent example would have been goog. if you had bought a straddle prior to the latest earnings, you'd have lost money - big money.

i think where you can make money is where you watch the stock after earnings and guidance announcement. sometimes, the stock will take time (a few days to a few weeks) before it fully reflects the full-importance of the recent earnings. within the 1-2 days after earnings, there can be an opportunity for picking the right direction.

you can buy some long term OTM puts or calls (so theta is not too costly), IV has collapsed and you hope that it doesn't go down anymore (or at least not by much) and you hold it for 2-3 weeks with a reasonable target on the stockprice where you will get out. within 2-3 weeks, you'll know whether you were right on your assessment of the direction and you can just get out or try to hit your target.

and remember, earnings is two-part - earnings (with all of the mumbo jumbo, revenues, net-income, expenses, and growth comparison, cashflow) and GUIDANCE.

my theory on this "time-lag" is because the fundies take time to get-out or reduce their holdings, or to get-in or increase their holdings because of the size of their positions. just my opinion.

Good trading
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i forgot to add... many times, there is no opportunity. the impact of the earnings and guidance is not enough to pick a direction that the stock hasn't already reflected by its current price. don't force it by having a personal bias.

and your market opinion for the 2-3 weeks matters, too, (if you have any). so if you think the market will be going down, it helps to pick stocks that are gonna go down and don't put a trade if you don't see any. you'll have internal psychological conflicts as you watch the market go in the direction you thought and the stock is being dragged with it, but you picked the other direction based on your assessment of the earnings.

good luck.
 
Quote from gkishot:

Why? That's why they are called volatile events because they tend to make a strong move.
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because its already priced into the option.... as a general rule if it seems plausible that a second grader could think of the strategy you've thought of, the market-makers know how to accurately adjust their spreads to make it unprofitable.
 
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