PCLN Earnings - 1080/1100/1120 Call Fly - Paper Trade

[RichardRimes]

Quote from Safilo:

All long positions depend on the volatility remaining the same or rising - again, obvious so no need to bring it up - and it's a safe estimate that the SPX volatility will not change much if at all...and if it does it is likely to increase due to QE manipulation.


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seriously? So if I'm long the SPX I "want" vol to rise? Where do you get YOUR information?



Also you can wordsmith "trading" all you want it still is a bet.

 

[sle]

Quote from Safilo:

You need to learn how to follow the conversation rather than injecting something that was never said and then arguing with yourself about it...and if you say it has "nothing to do with stats" and then bring up delta, a stat - you just contradicted yourself.

Delta is not a statistic. It's a model output

 

[Safilo]

Quote from RichardRimes:

seriously? So if I'm long the SPX I "want" vol to rise? Where do you get YOUR information?

Also you can wordsmith "trading" all you want it still is a bet.

IV is directly proportional to the option premium prices. If you bought an option at $1.00 per contract with 1% IV and the next day, the IV shot up to 10% your $1.00 contract price would rise accordingly - the opposite scenario is also true.

For long positions you want IV to be equal or greater than what it was when you bought the contract. For short positions, you want it to be equal or less than. That's why you can look for stocks with IV spiking to high percentages, short some options and then buy them back when/if the IV calms back down.

Quote from sle:

Delta is not a statistic. It's a model output

Don't get technical with me!

 

[drownpruf]

Quote from Safilo:

IV is directly proportional to the option premium prices. If you bought an option at $1.00 per contract with 1% IV and the next day, the IV shot up to 10% your $1.00 contract price would rise accordingly - the opposite scenario is also true.

For long positions you want IV to be equal or greater than what it was when you bought the contract. For short positions, you want it to be equal or less than. That's why you can look for stocks with IV spiking to high percentages, short some options and then buy them back when/if the IV calms back down.



Don't get technical with me!

Slow down, Bro! Nobel be a callin'!

Holy f*ck you're retarded (apologies to your parents).

 

[RichardRimes]

Quote from Safilo:

IV is directly proportional to the option premium prices. If you bought an option at $1.00 per contract with 1% IV and the next day, the IV shot up to 10% your $1.00 contract price would rise accordingly - the opposite scenario is also true.

For long positions you want IV to be equal or greater than what it was when you bought the contract. For short positions, you want it to be equal or less than. That's why you can look for stocks with IV spiking to high percentages, short some options and then buy them back when/if the IV calms back down.



Don't get technical with me!

In theory....in the REAL world of my trading experience when I was long an SPX call and IV doubled...market tanked and I lost money....my call did NOT double. Perhaps because there is just a bit more involved.

Curious .......is your wisdom from what you have read/studied or personal experience from X years of trading? Care to share?

 

[RichardRimes]

Quote from deltastrike:

Safilo must actually be Baron just trying to generate some entertainment!

 

[drownpruf]

Quote from Safilo:

I'm curious to hear some feedback from other option traders about non-obvious reasons for buying call options that are NTM (near the money) and expire in 6 months or later.

One obvious reason that I can think of is that the buyer is bullish on the stock and wants to benefit from any gains, but does not want to put up the capital to buy the stock outright (or wants leverage). Makes sense with expensive stocks like AAPL and GOOG...but is that the only reason?

And more importantly, if you, as the buyer of the option, are willing to wait it out like that, then why buy NTM options when you could go for an OTM strike that's a few bucks over the market price and pay a much lower premium?

On the flipside of this - why would a call writer selling these options want to bind themselves to a stock for 6-12 months for that one-time premium? I mean, if you do a call for AAPL that expires in 2015 you can get an $80+ premium per share, which is $8K+ per contract - but you have essentially 100% chance of it being ITM and you're bound for over a year.

I can kinda see why someone would buy this call, but not seeing the motivation for selling it - it just seems like a really bad deal across the board for the seller. What am I missing here?

ATM is a binary proposition, 50% likelihood. A pick-em market. "Near the money" is OTM and therefore even less likely, you think?!?! So your "100% chance" of being ITM is a bit optimistic! HTF were you not in the running for Fed Chair?

 

[Safilo]

Quote from RichardRimes:

In theory....in the REAL world of my trading experience when I was long an SPX call and IV doubled...market tanked and I lost money....my call did NOT double. Perhaps because there is just a bit more involved.

Curious .......is your wisdom from what you have read/studied or personal experience from X years of trading? Care to share?

You do realize that IV and market direction are mutually exclusive - you lost money because the market moved against you, not because IV didn't cause option premiums to rise enough to compensate.

IV refers to the magnitude of the market moving one direction or another from its current point. It tends to be higher in a market that is trending down, which is not to say it can't increase in a bull market. IV does not predict when or which direction the market will move, it just estimates by how much.

FYI a standard deviation can be calculated by multiplying the current market position by the IV. If the market price is at 1000 and IV is 10%, one standard deviation would be +/- 100, meaning an expectation that the market can move anywhere from 900 to 1100. That would you might want to set your spreads/hedges considering those boundaries to play it safe and lose money less often.

 

[drownpruf]

Quote from Safilo:

FYI a standard deviation can be calculated by multiplying the current market position by the IV. If the market price is at 1000 and IV is 10%, one standard deviation would be +/- 100, meaning an expectation that the market can move anywhere from 900 to 1100. That would you might want to set your spreads/hedges considering those boundaries to play it safe and lose money less often.

lol no. omg, bro! That's simply 68.27% of the distro!

Seriously, this is even more moronic than your "profitable positions within 3 std devs." Read a remedial 099 statistics book or find someone to think for you. For the sake of your kids!

 

[RichardRimes]

Quote from Safilo:

You do realize that IV and market direction are mutually exclusive - .
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THAT is not what YOU said...you said vol goes higher long make $$...anywhoo .......care to answer my question...is your experience "real" world or "book"?