No what I said was i could've closed the option positions and I could've broken even. Because of the mixed earning, the underlying first went up on the positive earnings and then went down on the negative revenue and after the meh guidance, it just went nowhere. So looking from hindsight, if I had closed my long call when it rode up and closed my long put when it went down, I could've broken even. But like you said, I would've had to adjust my "belief" that historical vol can predict or determine future IV which was what I believed in also at that time and I didn't so I held onto it and the next day got totally decimated by the volatility crush.
How to determine if options are cheap or expensive using historical data
- Thread starter Kust
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No what I said was i could've closed the option positions and I could've broken even. Because of the mixed earning, the underlying first went up on the positive earnings and then went down on the negative revenue and after the meh guidance, it just went nowhere. So looking from hindsight, if I had closed my long call when it rode up and closed my long put when it went down, I could've broken even. But like you said, I would've had to adjust my "belief" that historical vol can predict or determine future IV which was what I believed in also at that time and I didn't so I held onto it and the next day got totally decimated by the volatility crush.
Gotcha,you never delta hedged in any manner,be it stock or selling options..
It's easy to judge in hindsight,but it's fair to say a 25 percent drawdown of assets is a bit much for a single position...of long vol no less
P.s. why don't you take a look at Orats??
It's easy to judge in hindsight,but it's fair to say a 25 percent drawdown of assets is a bit much for a single position...of long vol no less
P.s. why don't you take a look at Orats??
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they are called stochastic volatilty models.. fuckin look it up
never happened to me.
i dont know why you guys do crazy shit.. we live in different universes
Ill be the first to admit I did some really dumb shit when I started out..Mercifully,it was OPM
I still do really dumb shit but luckily the smart stuff has been outweighing it for a few years.
When I do earnings play, no cuz it's an inherent delta hedge to each other but I should've done is do a bit of volatility hedge I guess so in a situation where the volatility is less than expected which is what I was in, I won't lose that much. But when I do directional, I do delta-hedge but it's the other way around. I do the directional bet with the underlying and hedge with the options so I get bigger bang for the buck with the underlying since it's got delta of 1 and then hedge with option so the cost is cheaper. And if I am wrong with on the underlying, hopefully the infinite gamma on the option will kick in and my loss will be covered and sometimes even turn it into a profit. I consider the hedging option as the wingman to my underlying. LOL
I did. It's similar to the analysis that I did before I decided to bet the house on that fateful earnings play but Orats' analysis is lot more extensive and detailed. I am impressed.
Maybe if I used that analysis, I might have arrived at the conclusion, MIGHT HAVE that that earnings play was too expensive because I remember that combo's price was really high because the historical IV on the earnings NFLX had been very high for the 2 years prior so maybe the combo price being too expensive might have at least made me not bet that much.But having said that, the model still would not have predicted how the future volatility would be based on historical volatility. In other words, the model would've still underestimated the future volatility causing you to undertrade if future volatility turned out to be even higher and overestimated future volatility causing you to overtrade if the future volatility turned out to be lower. Everything is too expensive or too cheap only from hindsight, unfortunately.
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Ah I am sure they didn't mind losing a bit of their money cuz u smooth, General Tao, u smooth...
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cuz when it all works out, it gives crazy returns too. Oh well you only live once. You never know what you can or cannot do until you try.
Matt_ORATS
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Didn't mean to pull up bad memories, but all of us can learn from each other's mistakes.
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