BIDU earnings

One last post here.

I modeled a new one... selling rear month straddles, buying front month straddles.

This may be the holy grail of selling IV.
Modelled on CRM, BIDU, etc... beautiful curve and simple.
 
Quote from scriabinop23:

One last post here.

I modeled a new one... selling rear month straddles, buying front month straddles.

This may be the holy grail of selling IV.
Modelled on CRM, BIDU, etc... beautiful curve and simple.
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IMO you are just doubling up a rev cal. and if the underlying doesn't move significantly, you will be doubling up your losses. try to re-model your holy grail :)
 
Quote from daniel5198:

IMO you are just doubling up a rev cal. and if the underlying doesn't move significantly, you will be doubling up your losses. try to re-model your holy grail :)
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These straddles won't be held til expiration. Actually, closed out the day after earnings (which is weds night by the way). So theta decay won't kill the front month noticeably. You're right, though, this would not have worked at all with BIDU or AAPL etc. as their earnings dates were too close to front month option expiration.

Look at that chart. We start at the white line, and any lines above that are where the thing will be priced with a drop of IV. Even with a 5% avg drop in IV, you are profitable with no movement.

I'm realizing strategy consideration is very correlated to where earnings lie in the options calendar. With this setup, you are long theta short IV ... so if IV moves more than theta, you win. Works perfectly for CRM.

One last thing: I theorize my Mar/Jun 50 rev calendar on NTRI failed not just because the underlying ended right on the 50 strike, but mainly because the short Jun month was not affected much by the drop in IV from earnings like Mar, since there is still another earnings announcement in May to keep Jun's IV inflated. This would have been profitable if I was long Mar, short Apr, though (if that was possible). Not profitable on long Feb, short Mar since we were so close to earnings.

btw: http://www.elitetrader.com/vb/showthread.php?s=&threadid=74853&perpage=6&pagenumber=1
 

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Quote from daniel5198:

IV_trader? now, HE is the true holy grail of rev cals . no doubt about that.
good luck to you!
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can't tell if you're sarcastic or sincere?

anyway, I'm wondering if short the May (straddle or call) on CRM makes sense, as its IVs might hold up decently since May has its own earnings. I'll model this with Apr tommorow.

Anyway, the risk reward on doing the double (straddle) versus the single (just calls) is definitely different. The double has same risk, nearly double the reward to the single (especially on big moves).
 
Quote from scriabinop23:

can't tell if you're sarcastic or sincere?

anyway, I'm wondering if short the May (straddle or call) on CRM makes sense, as its IVs might hold up decently since May has its own earnings. I'll model this with Apr tommorow.

Anyway, the risk reward on doing the double (straddle) versus the single (just calls) is definitely different. The double has same risk, nearly double the reward to the single (especially on big moves).
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Absolutely sincere, mate.
And to the trade: I'd go for a +Mar/-Apr ATM here. I do think CRM is a good candidate for a rev cal.
 
A couple comments:

- On the simulation you sent from TOS for CRM, the date is 02/19. You need to change that.
- About the short/long straddle: I think this would work in a "quiet" environment. But remember thaty it looks like before earnings front months are inflated more than back months and so they seem to crush more. However, TOS will give you the wrong values because of the way they calculate vega.
 
CROX 55 straddles Mar long, CROX 55 straddles Apr short.

IVs are very high. I put on a few. earnings tonight. This one might even move, as well as IVs dropping.
 
SO, on this CROX trade, you are assuming that Apr's will suffer more from IV fall, than Mar's, right? Let's see what happens as it was not the case in the NTRI and the CMG.
Did you look at RC and backspread ratio as well for this trade?
 
Quote from candeo:

SO, on this CROX trade, you are assuming that Apr's will suffer more from IV fall, than Mar's, right? Let's see what happens as it was not the case in the NTRI and the CMG.
Did you look at RC and backspread ratio as well for this trade?
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did not model the other two, although i'm not fond of the more directional nature of ratio trades.

yes, anticipating fallout of the back month.
 
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