There are always people on the Yahoo boards saying things like "I bought the calls and it moved up, but I still lost money. How can that happen?"
Just bot AAPL DD
- Thread starter Eliot Hosewater
- Start date
There are always people on the Yahoo boards saying things like "I bought the calls and it moved up, but I still lost money. How can that happen?"
I closed the puts for +.80. Now I am trying to decide what to do with the calls.
I can close them for another safe 80 cents. Or I can play with some other ideas. I can buy into a sort of butterfly - roll the long 180 calls to Nov 190 and sell a Nov 190/195 call spread for a net cost of around 3.50. If the TOS P/L screen can be believed (and I wonder sometimes) this would give me a range from 173 to 200 to still make a profit (or another chance to roll Nov to Dec in a few weeks).
Any input would be welcome. I think I have some time to decide.
ETA: Next time I think I will do a double calendar, and or go out another month on the longs.
Did someone say BIDU reports this week?
I can close them for another safe 80 cents. Or I can play with some other ideas. I can buy into a sort of butterfly - roll the long 180 calls to Nov 190 and sell a Nov 190/195 call spread for a net cost of around 3.50. If the TOS P/L screen can be believed (and I wonder sometimes) this would give me a range from 173 to 200 to still make a profit (or another chance to roll Nov to Dec in a few weeks).
Any input would be welcome. I think I have some time to decide.
ETA: Next time I think I will do a double calendar, and or go out another month on the longs.
Did someone say BIDU reports this week?
20 short straddles is not enough to make me nervous. Sorry if that would affect you.
You would have shit your pants but even a drop in price would have suffered some IV collapse since the news was out. You should study volatility and deltas and you might have answered your own question a bit. I was able to see what the potential loss on a drop in price would be under different vol assumptions and determined the risk was fine given the potential reward. This was not a bullish bet but a vol bet.
The risk was a major drop since it would inimize an IV collapse. However you can model the position and determine what risk you are willing to take on a drop under differnet IV assumptions. You always have to see the potential risks from such a position.
Yes..... this Thursday (Oct 25) after hours, options are very expensive.
Regardless of the move, near month IV is going to contract. A stock drop isn't going to hold the IV up at the pre EA level. Either way, one should have an idea of where the approximate break even points are and be prepared to support the position in the after market should it move to the extremes of the profit range.
Think twice about going out an extra month on the longs. If there's a similar amount of IV contraction on the 2nd and 3rd month out, you'll risk more premium loss.
If you're doing OTM double calendars. model the possibilities of slightly under and over writing. I say both because there are a number of variables to consider and the risk graph will change depending on the level of each (IV, skew, time remaining, distance to strike). For example, a double ratioed reverse calendar is usually more suitable closer to expiration than 3 weeks out but if the 2nd month IV is sky high as well, it might be OK 2 weeks out. You gotta play with the possibilities.
Good job with your foray into volatility trading!
oc...nice account size and another advantage....you are a great writer!(must have something to do with all that law studying in the day, et al) i have only half the advantage... i almost did that trade too. wish i did; anyway, there are more out there. an old buddy got me started in straddles.
eliot, thanks for illustrating your trade.