need feedback: which combo to pick?

N

newguy05

Lets say you want to make a play on oracle's post earning move. Which is the better atm strangle to buy?

DEC18 31C IV=52 vega=0.01 $0.4
DEC18 30P IV=58 vega=0.01 $0.4

vs

JAN22 31C IV=26 vega=0.04 $0.8
JAN22 30P IV=28 vega=0.04 $0.85

I am thinking Jan's combo, even though it has higer vega and twice as expensive, the Dec combo with double the IV and <2day expiration will lose its value right post earning where as Jan will still retain most of its values since its IV is much lower. I guess it's a question of vega vs IV?

what are your thoughts?
 
December is a pure binomial play - either the stock moves by more than what is priced into options and you make money, or the options expire worthless.

With January options you have some more leeway/time for the stock to make it's move even if the intial reaction is not strong enough.
 
It's a question of time, price and IV... and fear vs greed.

By 4 PM Dec. exp:

With a big move, Dec does better (more gain)
With a small move, Jan does better (less loss)


After Dec. exp:

Jan has a chance of doing better :)


And then there's the possibility of selling expensive Dec IV and buying cheaper Jan IV
 
I am not looking to hold it for longer than a few days max. Bought some Jan before the market closed, earning looks to be a snooze, will probably exit tomorrow.

BOT 15 ORCL false JAN 21 '11 31 Call Option 0.77 13:56:06 6.95 null
+ BOT 15 ORCL false JAN 21 '11 30 Put Option .910 13:56:55 14.65 null
 
a dud, lost 50 bucks. the atm positions lost about 1/5 IV but gamma from the underlying price move made up for most of the loss.


SLD 15 ORCL false JAN 21 '11 30 Put Option 0.23 10:28:46 10.70 -1045.36 null
+ SLD 15 ORCL false JAN 21 '11 31 Call Option 1.450 10:30:58 14.50 998.54 null
 
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