Price or implied volatility?

[tomk96]

you should be making trades based on risk/reward. if you think you have a sure thing by selling, there is nothing wrong with that trade whether the IV is high or low.

i'd rather sell vol, even with a low premium, at the top of it's range than sell a high premium option and the bottom of it's range.

 

[clarodina]

Why is that implied volatility does not matters for holding options to expiration? Would not decrease implied volatility decrease the value of call and puts even holding to expiration?

 

[MTE]

Quote from clarodina:

Why is that implied volatility does not matters for holding options to expiration? Would not decrease implied volatility decrease the value of call and puts even holding to expiration?

Changes in implied vol only affect market to market value prior to expiration. At expiration there is no time value left in an option, so implied vol is irrelevant.

 

[spindr0]

Quote from sle:

Wrong answer Your delta is highly sensitive to the implied vol, especially for very wingy options...

Let's see if I have this right. If the OP is holding his option until expiration, he should be concerned that delta is highly sensitive to the implied vol, especially for very wingy options? Whoooaaa-kay

 

[spindr0]

Quote from clarodina:

Why is that implied volatility does not matters for holding options to expiration? Would not decrease implied volatility decrease the value of call and puts even holding to expiration?

Holding until expiration means take a vacation. Visit Rip Van Winkle for a month. Recover from a coma. Get released from incarceration . Return for expiration Friday to deal with the position.

Now your options are either at intrinsic or worthless. Does it matter that while you were away, they may have done something?

 

[tomk96]

Quote from clarodina:

Why is that implied volatility does not matters for holding options to expiration? Would not decrease implied volatility decrease the value of call and puts even holding to expiration?

there is no volatility in the options at expiration. they expire worthless or into stock or cash (so parity).

 

[sle]

Quote from heech:

So what? In this scenario you're holding to expiration. When you hedge, you calculate delta based on your "known" future realized volatility (which guarantees a profit if true). The current market value of options, ie implied volatility, is totally irrelevant since you're never trading them after initial entry.

All you have done is substituted market implied vol with our own, the "marking" vol would still effect your rebalancing P&L.

Btw, this also assumes that you are managing your book on some form of volatility prediction (very few people I know do that). This type of vol management can produce a pretty "interesting" P&L profile in some cases.

 

[sle]

Quote from spindr0:

Let's see if I have this right. If the OP is holding his option until expiration, he should be concerned that delta is highly sensitive to the implied vol, especially for very wingy options? Whoooaaa-kay

We were talking about trading in underlying, in case you did not read the original post. Delta is pretty relevant in that case.