Perhaps this story might help you to create some ideas. Obviously, the chart is not the same but there are some useful ideas if you trade options:
https://www.bloomberg.com/news/arti...-turns-766-into-107-758-on-two-options-trades
ROKU trade ideas?
- Thread starter tally2019
- Start date
Perhaps this story might help you to create some ideas. Obviously, the chart is not the same but there are some useful ideas if you trade options:
https://www.bloomberg.com/news/arti...-turns-766-into-107-758-on-two-options-trades
Clearly. I am not looking to buy it, I was looking to see if anyone here had any interesting ideas for OPTION trades with this highly volatile name. Blue Water loosely threw out a straddle, but it looks like nobody else here is willing to touch it...
In any event, thank you for your response.
Great movie...
OK, here's an idea for ya. I used to trade a lot of high IV EAs. I'd look to sell a very inflated near week straddle or strangle and buy the next week's further OTM strangle if it had a acceptably lower IV and then ratio it. IOW, an unbalanced diagonalized short Iron Condor with more long legs than short. The R/R of the position looks a bit like a W with two troughs where you get a small spanking. It does OK if the underlying goes nowhere and well if there's a big move up or down.
The relationship between the IV of the two weeks determines viability and your post EA IV contraction GUESS and whether the options get there or overshoots determines your success (when there's non movement in the underlying). Lot of moving parts. To do these, I wanted a 3:1 reward to risk ratio in the body (center peak to bottom of the troughs) because there's a lot of slippage.
I stopped doing these because they were very time intensive: constantly checking the earnings dates and constantly looking up quotes and entering them into the charting program. I had an online buddy on the other side of the country who also did this so we split the ferreting up. Now, I'm too old for all of the effort :->).
That is seriously nifty. I just did a bunch of, um, ferreting in the analyzer, and - lo and behold - if the relative IVs work out and the price adds up...
I have a feeling that these are NOT the easiest critters in the world to find, even when the IV is high - underlyings with enough premium to give you the ratio you want aren't exactly lying about on every street corner - but it seems like a very cool possibility.
Thank you, @spindr0 !
I'm going to take a poke at setting up a scanner to look for sharp IV gradients; I already have a library in TradeStation that looks up earnings, and it wouldn't be too hard to combine them. Further thought will be applied here.
tally and Blue Water -
You're welcome. Yes, it's time intensive finding these. And even if you find them, some may be worthless because the B/A spreads are too wide and/or there's insignificant option liquidity.
Monitoring them before taking a position is also time intensive because sometimes the IV disparity peaks as much as 24 hours before the EA or sometimes in the morning before a PM announcement. I used to use IBKR's DDE connection to Excel to do some of the heavy lifting and that was helpful.
You need charting that enables you to select a lower post earnings IV as well as time slices that graphs the P&L of the entire position the day of the EA's. Sorry, can't help you with this one.
Don't think for a minute that I've given you some secret sauce strategy to easy profits. This is usually a grind it out strategy with an occasional rock star.
There are a number of nuances to this.
If the underlying really moves up or down a lot during after hours, use the underlying to lock in some gains (you have more long legs than short). Gains sometimes disappear by the regular hours open. That also holds true for after the open because the options can have Holland Tunnel wide B/A spreads that won't narrow for some part of the morning, preventing you from trading out of the options w/o a large haircut.
When option trading resumes in the AM, sometimes near week IV craters immediately and next week's IV winds down a bit slower. In such cases you need to be decisive and grab whatever profit (or cut losses) ASAP. You dawdle, you lose.
You also need to be proficient at setting up combo orders on the fly as well as adjusting or unwinding positions incrementally so that you don't create undesirable one sided risk.
Last of all, you really need to paper trade these. There's a lot of 'feel' to them that comes from doing them. When it's hitting the fan, you can't be the deer in the headlights wondering: "Hmmm, what did Spin say? Let me go check my notes." You won't know if this idea is worth anything to you until you see the performance of a bunch of them. And sorry, no refunds are available for bad free advice!
You're welcome. Yes, it's time intensive finding these. And even if you find them, some may be worthless because the B/A spreads are too wide and/or there's insignificant option liquidity.
Monitoring them before taking a position is also time intensive because sometimes the IV disparity peaks as much as 24 hours before the EA or sometimes in the morning before a PM announcement. I used to use IBKR's DDE connection to Excel to do some of the heavy lifting and that was helpful.
You need charting that enables you to select a lower post earnings IV as well as time slices that graphs the P&L of the entire position the day of the EA's. Sorry, can't help you with this one.
Don't think for a minute that I've given you some secret sauce strategy to easy profits. This is usually a grind it out strategy with an occasional rock star.
There are a number of nuances to this.
If the underlying really moves up or down a lot during after hours, use the underlying to lock in some gains (you have more long legs than short). Gains sometimes disappear by the regular hours open. That also holds true for after the open because the options can have Holland Tunnel wide B/A spreads that won't narrow for some part of the morning, preventing you from trading out of the options w/o a large haircut.
When option trading resumes in the AM, sometimes near week IV craters immediately and next week's IV winds down a bit slower. In such cases you need to be decisive and grab whatever profit (or cut losses) ASAP. You dawdle, you lose.
You also need to be proficient at setting up combo orders on the fly as well as adjusting or unwinding positions incrementally so that you don't create undesirable one sided risk.
Last of all, you really need to paper trade these. There's a lot of 'feel' to them that comes from doing them. When it's hitting the fan, you can't be the deer in the headlights wondering: "Hmmm, what did Spin say? Let me go check my notes." You won't know if this idea is worth anything to you until you see the performance of a bunch of them. And sorry, no refunds are available for bad free advice!
