Weird can anybody explain?

[stefan_777]

Quote from failed_trad3r:

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!

You should still be demoing these things and reading up....

They won't be in the money until 1120, they only consist of time premium until then. They will be profitable closer to 1120 due to the drop in volatility.

 

[spindr0]

Quote from failed_trad3r:

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!!! Guys, volatility seems to be exponential not linear.

It's linear ATM

 

[Optional]

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 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

Welcome to wonderful world of VOL....You better learn how it works or you're going to lose a lot more money...
BTW, how did the equidistant put option do over the same time frame (what would have happened had you sold the 950 put rather than buy the 1120 call)?

 

[Optional]

I'm going to assume you paid 17.50 for your call options (1120 June Calls)...
Trading around 14 right now, even though the market is about 40 pts higher than when you entered...

In hindsight, you could have SOLD the 950 June put for about 20 pts...it's worth 4 or 5 right now...

Sounds simple, but of course it's not...

Buying options outright is generally a losers game

 

[Coolio]

Quote from Optional:



Buying options outright is generally a losers game

Bingo!

If you're bullish sell put spreads 25-40 days out from expiration. If your bearish sell call spreads 25-40 days out from expiration.

If vol is already way low and you see a bearish play but the sold call spreads seem "too close" then use 2-3 month put calenders, or buy a bear put spread ATM or ITM.

Rule of thumb: ALWAYS use spreads.... when vol > 30 be in sell mode bullish and bearish .... when vole < 20 .. be in buy mode bullish and bearish.

Rule of thumb: ALWAYS be THETA positive. One never knows in regard to timing .. might as well get paid to wait.

The Major Commandment: Buying options outright IS GENERALLY A LOSERS game!!!!!

 

[failed_trad3r]

Quote from Coolio:

Bingo!

If you're bullish sell put spreads 25-40 days out from expiration. If your bearish sell call spreads 25-40 days out from expiration.

If vol is already way low and you see a bearish play but the sold call spreads seem "too close" then use 2-3 month put calenders, or buy a bear put spread ATM or ITM.

Rule of thumb: ALWAYS use spreads.... when vol > 30 be in sell mode bullish and bearish .... when vole < 20 .. be in buy mode bullish and bearish.

Rule of thumb: ALWAYS be THETA positive. One never knows in regard to timing .. might as well get paid to wait.

The Major Commandment: Buying options outright IS GENERALLY A LOSERS game!!!!!

How do I calculate THETA in Interactive brokers for a calendar spread (or other type of spread)?
I can only get theta of single options with IB analytics???

 

[loufah]

Quote from failed_trad3r:

Well, I just thought of something! Instead of buying calls i can buy puts on the Vix! This way I get money even if volatility goes down because that means the vix goes down which means the put rises in value?>

Well, VIX options, both puts and calls, increase in price as the market volatility goes up. When the market had its 1000 point intraday drop a few weeks ago, I remember VIX puts (which I happened to be long at the time) actually increased in value during the day.

If you want to trade volatility, just trade VXX directly. Keep in mind that it doesn't always move opposite the market, and that it tracks VIX futures, not the actual VIX. A couple days ago,when we had a 1% down day, volatility went down, too, because a day when we only go down 1% is relatively good news.

 

[rew]

Quote from failed_trad3r:

How do I calculate THETA in Interactive brokers for a calendar spread (or other type of spread)?
I can only get theta of single options with IB analytics???

The Greeks are linear, so just add 'em up. If you have a bull call spread where the long option has theta -0.07 and the short option has theta +0.03 then the net theta is -0.04.

 

[Jerkstore]

Quote from livevol_ophir:

It's the vol. If you are buying or selling options you are a vol trader. Even if you don't know what vol is, you're still trading it.

My best advice, don't trade options until you've done your homework. Delta is the last risk we pay attention to on the floor, yet it's the first (or only) for many retail investors. If you think a stock is gonna go up, buy the stock (or vice versa of course). If you buy or sell an option, you are buying or selling vol - that's the bet you're taking.

Selling a covered call is one of the best strategies to make mmoney in an up market. Buying an OTM call requires a monster move, as the OP has figured out.

 

[Free Thinker]

Quote from Jerkstore:

Selling a covered call is one of the best strategies to make mmoney in an up market. Buying an OTM call requires a monster move, as the OP has figured out.

actually selling covered calls is a poor strategy in an "up"market.