OCs Implied Volatility Trading Journal

[rallymode]

Phil,

i am stating the obvious as it is obviously not understood by everyone on this thread. I am not picking on anything, just making a comment as there are many people who do trade your positions. Here is what i am talking about.

Say you predict vols to increase by 1000-2000 bps due to an earnings report that falls within the feb reporting cycle. You go out and buy the apr paper now and sell dec against it, and then jan against it, you are doing nothing to capture the vols increase and you will not have an above the zero risk/graph when vols uptick by 1000bps. All you are doing is collecting theta if done through straight calendars and hoping the spot wont move or betting on a big move if doing backspreads. Simple as that. There is no reason for apr vols to increase, and as soon as the feb paper gets listed it will most likely already be ticking at the higher vols.

So again, your uptick in vols will not necessarily translate to profits when the volatility cycle kicks in. If this wasnt clear then i give up. :eek:

 

[yip1997]

Quote from rallymode:

Phil,

i am stating the obvious as it is obviously not understood by everyone on this thread. I am not picking on anything, just making a comment as there are many people who do trade your positions. Here is what i am talking about.

Say you predict vols to increase by 1000-2000 bps due to an earnings report that falls within the feb reporting cycle. You go out and buy the apr paper now and sell dec against it, and then jan against it, you are doing nothing to capture the vols increase and you will not have an above the zero risk/graph when vols uptick by 1000bps. There is no reason for apr vols to increase, and as soon as the feb paper gets listed it will most likely already be ticking at the higher vols.

So again, your uptick in vols will not necessarily translate to profits when the volatility cycle kicks in.

RM,

Do you mean that even if feb vol increases by 1000 bps, the vol of apr options will stay the same because the earning effect is actually priced into the option price?

 

[rallymode]

Quote from yip1997:

RM,

Do you mean that even if feb vol increases by 1000 bps, the vol of apr options will stay the same because the earning effect is actually priced into the option price?

yip,

apr will uptick also albeit slightly. Vols across the board will increase, less in the back months. Even though the vegas are in the back months, you still need to balance them against the thetas you are bleeding while waiting for the "spike". The vols increase due to earnings isnt a sure way to push a graph above zero as described in this thread. That's all i am saying.

The only way to achieve what phil is attempting is to first have a pretty good idea of what cycle the news will fall under, then as soon as the cycle gets listed, you want to go long as early as possible while there are still vegas in the paper but you want to make sure you are still buying "cheap" vols. Even then, you need to balance the magnitude of the vols ramp against the theta bleed. IV_Trader is doing this exact same thing. I suggest you guys read some of his work to get a better idea of how to capture earnings related volatility increases. Trading volatility is alot more involved than placing calendar backspreads under low vols and going to sleep and i am not sure many on this thread realize that.

 

[El OchoCinco]

Rally... If by DEC expiration vols in the back month tick up by 1000 to 2000 bp the whole risk graph is above zero. that is what mantenar's chart shows and what I have said. If that was not clear then I hope it is clear now.

You are just picking out examples to disprove something I have not said.

Quote from rallymode:

Phil,

i am stating the obvious as it is obviously not understood by everyone on this thread. I am not picking on anything, just making a comment as there are many people who do trade your positions. Here is what i am talking about.

Say you predict vols to increase by 1000-2000 bps due to an earnings report that falls within the feb reporting cycle. You go out and buy the apr paper now and sell dec against it, and then jan against it, you are doing nothing to capture the vols increase and you will not have an above the zero risk/graph when vols uptick by 1000bps. All you are doing is collecting theta if done through straight calendars and hoping the spot wont move or betting on a big move if doing backspreads. Simple as that. There is no reason for apr vols to increase, and as soon as the feb paper gets listed it will most likely already be ticking at the higher vols.

So again, your uptick in vols will not necessarily translate to profits when the volatility cycle kicks in. If this wasnt clear then i give up. :eek:

 

[rallymode]

Quote from optioncoach:


You are just picking out examples to disprove something I have not said.

Actually, i thought the comment was worth making in the context of trading volatility but will now cease. Sorry for the disturbance. Good luck with your trades.

 

[LeonPhelps]

Quote from rallymode:

Phil,
i am stating the obvious as it is obviously not understood by everyone on this thread. I am not picking on anything, just making a comment as there are many people who do trade your positions.

So are you saying me, yip and donna should't keep parroting all of coach's trades? Rally, I see what you are trying to do. And it ain't gonna work, man. You want to get the rest of us off the gravy train so you can have it all to yourself. Well that ain't fair, dude. Share the wealth, so to speak.

Coah, slow down with these trades, bro. I can hardly keep up before the market closes. Kind of getting maxed on the old margin. Had to go a little bit above the failsafe 60% but i"ll trim it back as soon as I cash in on this RIMM move.

 

[El OchoCinco]

I use haircut margin so I can do a lot more positions than my reg t would allow. Of course following me blindly is ill-advised. My advice is to review the criteria and characteristics and cherry pick the best ones in your own eyes. You will do better that way since it will force you to analyze and make independent determinations

Quote from LeonPhelps:

So are you saying me, yip and donna should't keep parroting all of coach's trades? Rally, I see what you are trying to do. And it ain't gonna work, man. You want to get the rest of us off the gravy train so you can have it all to yourself. Well that ain't fair, dude. Share the wealth, so to speak.

Coah, slow down with these trades, bro. I can hardly keep up before the market closes. Kind of getting maxed on the old margin. Had to go a little bit above the failsafe 60% but i"ll trim it back as soon as I cash in on this RIMM move.

 

[frank99]

LeonPhelps,

Is an announcement coming for RIMM?
When?

Their earnings announcement isn't until Dec 21st. Or maybe this is the one you're talking about.


Thanks,


Frank

Quote from LeonPhelps:

So are you saying me, yip and donna should't keep parroting all of coach's trades? Rally, I see what you are trying to do. And it ain't gonna work, man. You want to get the rest of us off the gravy train so you can have it all to yourself. Well that ain't fair, dude. Share the wealth, so to speak.

Coah, slow down with these trades, bro. I can hardly keep up before the market closes. Kind of getting maxed on the old margin. Had to go a little bit above the failsafe 60% but i"ll trim it back as soon as I cash in on this RIMM move.

 

[rockn]

Hi,

Just wanted to post current long options here - great journal btw, I can use this and learn something. Critque if you like

all Jan calls purchased in mid Oct after OEX week:
BSXAD Boston Scien $20 (probably should Apr calls here, nice chart though)

OKIAZ Charter Comm $2.50

MSQAX Msft $30

NTAZ Nortel $2.50 (not giving any hope to these with reverse split announced)

 

[RichardRimes]

Quote from LeonPhelps:

So are you saying me, yip and donna should't keep parroting all of coach's trades?

Yoo hoo...Leon..I'm not parroting these trades just watching and learning!