short the next few days...
till $70...wow, that's rough.
till $70...wow, that's rough.
netflix earning play?
- Thread starter newguy05
- Start date
Yep exactly like precision bombing from 10,000 feet! that was my question at the beginning, if there is a better play given the expectation is a big move. Without having to pick a strike range is definitely better, but the only thing is i dont want to be long vega on an earning trade especially on this crazy stock, as the iv crush will most likely kill the position. So how do you do a straddle/strangle that's short vega?
sold the 160/165/170 for around +$1100 today, for net -$400 loss. I can live with that since the stock went opposite of my prediction. But lost so much from the slippage, IB's combo trade for anything more than 2 legs are worthless, they never get hit...
I'd like a complex option position that makes a lot of money if the stock moves a lot but doesn't lose if it doesn't, has narrow B/A spreads, good liquidity, gives better than midpoint fills and closes itself at the maximum profit pointQuote from newguy05:
Yep exactly like precision bombing from 10,000 feet! that was my question at the beginning, if there is a better play given the expectation is a big move. Without having to pick a strike range is definitely better, but the only thing is i dont want to be long vega on an earning trade especially on this crazy stock, as the iv crush will most likely kill the position. So how do you do a straddle/strangle that's short vega?
Reality is, no such position exists. Risk and reward go hand in hand so you have to take on some of one to get the other. So there's no cookie cutter answer that fits all situations all of the time nor is there a short answer to your question.
Expecting a big move? The obvious is a long straddle/strangle but IV crush is tough to overcome. So that means something must be sold (as you did) to reduce that. If there's IV expansion, as there should be before an EA, then you have to look at where it is, how much it is in each month, where you are in relation to historical, and how much time there is until expiration.
If it's close to expiration and 2nd month IV is inflated, I'd look at double reverse calendars (calendar straddles) or calendar strangles. If there's more time, standard doubles. In either case, ratioing one of the months (usually unbalanced) can help to shift your Greeks as well as the P&L curve. P&L curve will be W shaped or inverted W and choice depends on whether you expect a big move or not.
Knowing your approx BE and max gain/loss points is imp't since the underlying can sometimes be used during non regular hours to mitigate movement to and through these points (obviously not the case if there's a gap).
How you exit these positions the next AM can affect how well you do - or don't - as the rate of IV contraction in the different months the AM after the EA is also a factor. These positions take a lot of sifting to find and a bit to manage.
As I said, no easy answer
If you're doing positions that have multiple ways of entry, set up all possible combos and use IB's price alerts to work the order.
For example, a pair of calendars (puts and calls) would be the same as a pair of straddles or strangles (depending on if same or different strikes). Very often you'll see someone come in at a better price on a combo that isn't reflected in the other(s). It's more work but it can provide a better fill.