Volatility Crush for HPQ Q4 earnings Nov 23rd 2015

[londonkid]

Hi

I don't trade options currently focused on futures/fx, i have read a few books Sinclair, Cottle, Natenberg & Baird. I can see though how in the future I definitely want to trade a portfolio options as another non-directional trade in the arsenal.

Hoping to start a discussion on how you go a about trading volatility crush around earnings. I have selected HPQ as they are releasing Q4 earnings on Nov 23rd so this could be a live case study.

Any option gurus out there want to chip in on how you would potentially trade this opportunity. I know there are some option experts who read here so hopefully they can chime in.

Thanks in advance.

 

[xandman]

Just a cost perspective:

Trading volatility on such a low priced stock is a heck of a lot of commissions. Generally, you want to trade ATM volatility on a high priced stock. If its under $100, I would rather punt delta.

The low priced stocks that enough juice to play vol games with is biotech and oil exploration. Unfortunately, I have gotten my bells rung hard from playing those. I would go back in if I find a trading buddy/pharmacologist. Additionally, the implied volatility doesn't crash much post earnings (but realized may).

 

[Gambit]

Just a cost perspective:

Trading volatility on such a low priced stock is a heck of a lot of commissions. Generally, you want to trade ATM volatility on a high priced stock. If its under $100, I would rather punt delta.

The low priced stocks that enough juice to play vol games with is biotech and oil exploration. Unfortunately, I have gotten my bells rung hard from playing those. I would go back in if I find a trading buddy/pharmacologist. Additionally, the implied volatility doesn't crash much post earnings (but realized may).

Great point xandman. Once you factor in price and liquidity, the universe of potential candidates becomes a lot smaller.

 

[Gimpyron]

Your friend Gimpyron just got burned on he's short straddle position on JWN yesterday (worst day for the stock in 15 years).
Playing volatility worked for me few times, be sure when you see a big gap in the pre-market your in trouble.
I am still testing the field and i expect to find the highest probability strategy i can get

 

[smile]

Hi

I don't trade options currently focused on futures/fx, i have read a few books Sinclair, Cottle, Natenberg & Baird. I can see though how in the future I definitely want to trade a portfolio options as another non-directional trade in the arsenal.

Hoping to start a discussion on how you go a about trading volatility crush around earnings. I have selected HPQ as they are releasing Q4 earnings on Nov 23rd so this could be a live case study.

Any option gurus out there want to chip in on how you would potentially trade this opportunity. I know there are some option experts who read here so hopefully they can chime in.

Thanks in advance.

An IV chart like this will give you a general idea of what sort of IV crush you can expect for a
given stock.