Riskarb's combo to fly conversion journal

nobody trading options anymore ?
Take a look at NFLD (reporting today , AC). This is not report related trade. The JAN 07 vols = 120(!) , the front months vols are at 50esh. obviously there is an FDA event sometimes later around Jan , but in the mean times , one can establish and excellent Gamma/ theta ratio position via calendar. (maybe long May and short Jan). BTW , HV is 50 , so its not like stock not moving at all .I wonder how riskarb would model it , where is Otomay Brown when you need her...
 
Quote from IV_Trader:

nobody trading options anymore ?
Take a look at NFLD (reporting today , AC). This is not report related trade. The JAN 07 vols = 120(!) , the front months vols are at 50esh. obviously there is an FDA event sometimes later around Jan , but in the mean times , one can establish and excellent Gamma/ theta ratio position via calendar. (maybe long May and short Jan). BTW , HV is 50 , so its not like stock not moving at all .I wonder how riskarb would model it , where is Otomay Brown when you need her...
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hi IV glad you posted...wanted to thank you for the heads up on FFIV...I did a put cal on it and of course at first went up...today looking pretty good:p
 
Donna, FFIV reports earnings on 4/20. The vol for Apr 60 is at 70%. volatility for May 60 is at 55%. Reverse calendar May 60/Apr 60 looks good. What is the best time to put this trade. Any preference on put/call Reverse calendar.
 
Quote from mantenar:

Donna, FFIV reports earnings on 4/20. The vol for Apr 60 is at 70%. volatility for May 60 is at 55%. Reverse calendar May 60/Apr 60 looks good. What is the best time to put this trade. Any preference on put/call Reverse calendar.
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That is a hard choice...have't a clue what it will do. I'm just not comfortable with reverse cal's. My put cal looks pretty good but with earnings the day before exp???? however after earnings the vol's should decrease significantly...right now I'm just watching and waiting.
 
Donna, Is your put calendar Delta neutral. Do you make any adjustments to make it neutral after you place the trade. I think you expect the volatility to collapse after the earnings. why do you want to put this spread so early before the earnings date. Just want to understand your thought process. Thxs.
 
good questions. not delta neutral. I actually put the put cal on Mar 10 because I felt the stock was over-valued...more of a value play. Also just because I was in the mood for more put calendars and IV kinda brought it up. I put on Jul/Apr 60 put cal at a debt of $2.40. Normally I will watch a stock for awhile before I make a play but didn't this time. The vol's were high enough to make the premium atractive to do a cal.

Initially after I put it on the stock went up and I thought oops, bad move.... but because my longs are Jul I had time for things to come down and collect the prem's month to month. I figure I have at least two rolls to break even or come out ahead.

I'm sorry I can't be more articulate I'm just learning and beginning to understand how calendar's work. I'm still chosing calendar's based on my opinion of whether the stock is over-valued or under-valued. Right now all but one calendar I have are puts. The one calendar I have that is a call is on BG..a stock I've watched for abt a year and think it will be a modest mover upside therefore probably good for a call cal.
 
Is anybody comfortable with the R/R for these? I've been testing some of these out this month but the naked straddle positions even for only 10 days or so still make one uneasy. Due to that fact, realistically you don't want to place too many lots but try to spread out amongst numerous underlyings. But then again there comes a point that it may get labor intensive for the potential reward. I did convert some of them into iron flies for a small debit or even a credit, and others I just close them out at a small loss or profit. I would like to hear some opinions if I may .... thanks.
 
Quote from DonnaV:

and yes I do expect the vols to drop after earnings
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Donna , I would not go short (any position) FFIV into report overnight. this stock moved a lot in the past after earnings announcement.
Mantenar , I trade many RC on FFIV , made money many times ; its all depends what Front / Back month ratio will be at 20th.
Good luck all.
 
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