unfortunately I think you have a lot more money to lose to learn, I suggest you study the greeks more and how they change based on what happens...options on the vix are actually the volatility of volatility so it's not that simple...volatility still matters. You didn't really mention what calls you bought or what you bought them on so we can't really tell you why your options dropped in value even though directionally you were correct. Did you buy way out of the money calls? Those would barely change as they have a very low delta...if you bought at the money stuff sure they would have gained value but vol got destroyed today as mentioned previously so yeah they wouldn't be worth as much as they could have had vol remained the same. Remember vol gets firm (goes up) to the downside in the equity market...assuming that is what you are trading. Also don't forget vix options are based on the vix futures...
Weird can anybody explain?
- Thread starter failed_trad3r
- Start date
if i cant buy calls because i think the bottom is in because of vol then what can i do to plan on taking advantage of snapbackrally?
you can buy calls if you think the price will blow through your strike by expiration and stay there aka enough to pay for your premium...you could also sell those expensive (vol-wise) downside puts and/or buy calls against it...you could just buy the stock...of course if we get another leg down those puts are going to be very costly...many things you can do, unfortunately nobody has the real answer as to what you SHOULD do...but that's what I think you could do if you want to take advantage of the current high vol and think we are going higher.
You short puts! Bullish on stock and bearish on volatility at the same time! Although I think you've tried this...
http://www.elitetrader.com/vb/showthread.php?s=&threadid=197979&perpage=10&pagenumber=2
What strike price?
They would meet their strike price around ES 1120, I bought them at ES 1055 and now at ES 1100 barely in the money, some are in the red!
OMG I JUST FOUND OUT A SHOCKING THING
I downloaded this free option calculator filled in stuff like price of stock, strike, volatility (i think they mean volatility of option), dividend and interest rate. By the way, I dont get what they mean with interest rate. Is is saving rate of feds rate of 0,25?? Anyway I dont get why interest rate is important. But okay thats not the shocking part. WHats shocking was I filled in a volatility of 60, then 40, 60 is 1.5 times 40, but the price of the option was 3 times as much as the price at 40!!!:eek: :eek: :eek:
This is very shocking. Guys, volatility seems to be exponential not linear. Last friday morning I bought calls when ES was 1055, but the VIX opened at 45, almost the top!!! So I bought call options at the top now the VIX is 30 so what does this mean. An option that will go from 45 to 30 volatility loses like 80% of its value if stock price remains the same, just because of volatility!!!
OMG I am so MAD. I got the direction right and was up like 45 ES points even with the drawdown earlier this week, but still lost money! I am writing this post to warn everybody!!
Also why did nobody told me!! Im so mad
I downloaded this free option calculator filled in stuff like price of stock, strike, volatility (i think they mean volatility of option), dividend and interest rate. By the way, I dont get what they mean with interest rate. Is is saving rate of feds rate of 0,25?? Anyway I dont get why interest rate is important. But okay thats not the shocking part. WHats shocking was I filled in a volatility of 60, then 40, 60 is 1.5 times 40, but the price of the option was 3 times as much as the price at 40!!!:eek: :eek: :eek:
This is very shocking. Guys, volatility seems to be exponential not linear. Last friday morning I bought calls when ES was 1055, but the VIX opened at 45, almost the top!!! So I bought call options at the top now the VIX is 30 so what does this mean. An option that will go from 45 to 30 volatility loses like 80% of its value if stock price remains the same, just because of volatility!!!
OMG I am so MAD. I got the direction right and was up like 45 ES points even with the drawdown earlier this week, but still lost money! I am writing this post to warn everybody!!
Also why did nobody told me!! Im so mad
Quote from failed_trad3r:
OMG I JUST FOUND OUT A SHOCKING THING
I downloaded this free option calculator filled in stuff like price of stock, strike, volatility (i think they mean volatility of option), dividend and interest rate. By the way, I dont get what they mean with interest rate. Is is saving rate of feds rate of 0,25?? Anyway I dont get why interest rate is important. But okay thats not the shocking part. WHats shocking was I filled in a volatility of 60, then 40, 60 is 1.5 times 40, but the price of the option was 3 times as much as the price at 40!!!:eek: :eek: :eek:
This is very shocking. Guys, volatility seems to be exponential not linear. Last friday morning I bought calls when ES was 1055, but the VIX opened at 45, almost the top!!! So I bought call options and the top now the VIX is 30 so what does this mean. An option that will go from 45 to 30 loses like 80% of its value if stock price remains the same, just because of volatility!!!
OMG I am so MAD. I got the direction right and was up like 45 ES points even with the drawdown earlier this week, but still lost money! I am writing this post to warn everybody!!
If ABC stock is at 120 and IV doubles, then the 120 (ATM) calls and puts will approximately double too.
The OTM options will more than double. The MORE otm the option is, the more its price will increase on a percentage basis.
So if you take a series of options, from ATM to far OTM, and IV doubles, the ATM option's price will increase the most on an absolute basis, and the least on a percentage basis.
The most OTM option will increase the most on a percentage basis, and the least on an absolute basis.