Earnings Volatility Plays

[bebpasco]

Quote from ramaTrade:

I think CRB means Calendar Ratio Backspread, which is not nirvana and has drawback of its own like any other strategies.

lol! No, it certainly is not. Nirvana refers to the hapless search for a reasonably priced risk graph (P&L) software package which allows IV adjustments for individual legs and multiple risk graphics over time.

Anyway if you know of a stock that is/was trading at $165+ on 9/1 with pre-event IV's in the 90/70 area for successive months, I'd sure like to know what it is. I want to verify that poster's numbers and try some trade modifications of my own to his idea.

 

[acen1975]

Quote from spindr0:

Sorry but you are wrong. There are earnings set ups where the IV contraction in the front month results in a profit despite the loss of the back month. And even with more long legs than short.

oooo really?with diagonal it may happen,but with calendar ....

the other thing is,that its kind of stupid to bet on a difference on falling IV,with a bullish IV strategy........at least i find it absurd,you might not......
how about playing for difference in falling IV with a bearish IV strategy?
and in both months,if think that the IV will drop everywhere?
to bet on a difference change in IV between two moths is a total nonsense for me.......just bet on the change,not on the change between months.....
you will make money,NOT LOSE ,like in your case will happen

 

[acen1975]

Quote from maninjapan:

Guys, I am currently looking into some different possible earnings plays, specifically in regards to volatility in the weeks leading up to earnings. I am working on 2 assumptions/ hypothesis (both of which may prove to be false or not profitable) One is that the total IV of an underlying often has a tendency to increase leading up to the earnings announcement, the other is that the front month IV will increase at a greater rate than a back month creating an increasing spread in IV.

I am a little confused as to which strategy woud best take advantage of this situation. Calendar? Reverse Calendar, or other? My understanding of a Calendar is that it generally results in a profit with an increase in volatility (all other greeks being equal for now). However I would think that if you wanted to profit from the increase in IV spread between the front month and the back month, then a reverse calendar would be the strategy to use.
If anyone has any input on this it would be much appreciated.

Thanks in advance

forget the calendar.forget the back month.just the near:

for up in IV-stradlle or ratio back spread,but you run against time.its better to bet on falling IV ,just before earnings:
1.short straddle,if you dont expect a big move
2.ratio spread if you thing there might be no move,or a move in one direction only.
3.broken wing butterfly,if you dont wanna risk gamma exposure.
4.build a christmas tree

its gonna cost you a lot of money,till you realize,that the calendar is not your strategy.......and it really hurts when your bet was right,but you lost money from choosing the wrong spread

 

[spindr0]

Quote from maninjapan:

spindr0, have you ever used OptionVue? Thats what I use, still getting used to all the features though.

Yes, I used Optionvue a long time ago.

 

[maninjapan]

Quote from spindr0:

Yes, I used Optionvue a long time ago.

not sure how different the current version is to what you used. Have you found anything better than it?

 

[spindr0]

Quote from acen1975:

oooo really?with diagonal it may happen,but with calendar ....

Thanks for performance possibilities of a calendar spread (horizontal). It might be helpful if you tuned into what the discussion has been about for the past 3 pages. Perhaps even look at the attachment provided by pengw on page 6 which is a calendar ratio backspread (which might be one of those perhaps diagonals).

the other thing is,that its kind of stupid to bet on a difference on falling IV,with a bullish IV strategy........at least i find it absurd,you might not......
how about playing for difference in falling IV with a bearish IV strategy?
and in both moths,if think that the IV will drop everywhere?

to bet on a difference change in IV between two moths is a total nonsense for me.......

just bet on the change,not on the change between months.....
you will make money,NOT LOSE ,like in your case will happen

I'm sure that there are a lot of things done b/t two moths that you think are total nonsense.

 

[spindr0]

Quote from maninjapan:

not sure how different the current version is to what you used. Have you found anything better than it?

I'm sure that it is greatly improved since I looked at it more than a decade ago. However, one of my informants demo-ed it last year and told me that it's not what I want

 

[maninjapan]

Quote from spindr0:

I'm sure that it is greatly improved since I looked at it more than a decade ago. However, one of my informants demo-ed it last year and told me that it's not what I want

anything else out there you reccommend at the moment?

 

[spindr0]

Quote from maninjapan:

anything else out there you reccommend at the moment?

I think that there are far more competent people than me here who might have software recommendations for you. However, I sincerely doubt that Optionvue will let you down if you get your timing and selection right.

 

[maninjapan]

right, like I said, Im still getting through all the functions that it has. Always interested in what else is out there though.