Thanks optioncoach...do I need to subscribe to anything to get that chart? I was having trouble finding where to see that. Anyway, my intention on the strategy would be just to capture a piece of the increase in IV, selling into the buying frenzy that oftens seems to happen the day before earnings come out on these stocks. I just didn't know how realistic that would be to actually execute.
What's the name of this strategy?
- Thread starter aeliodon
- Start date
www.ivolatility.com is free for basic IV info.
Near the top is a box to enter a ticker symbol. Enter the symbol there and click on BASIC for basic info on IV. If you get that, on the right are two small charts the one with 2 lines is historical IV and historical SV. That one will show you IV over the past year where you can see spikes leading into earnings and crashes afterword.
Near the top is a box to enter a ticker symbol. Enter the symbol there and click on BASIC for basic info on IV. If you get that, on the right are two small charts the one with 2 lines is historical IV and historical SV. That one will show you IV over the past year where you can see spikes leading into earnings and crashes afterword.
I think a straddle by definition is risky, or let's call it "low probability". And yes, if the IV is low, the odds that it will move enough in the desired direction is lowered as well. No free lunch here
If you know it's going to move big, but not sure in which direction, the straddle or a strangle is probably the way to go. You can also consider a ratio backspread, but this will really only allow you to profit much from one direction, although if it moves big in the "wrong" direction, you could make a little depending on how you structure the backspread. Lower risk, lower reward. It's still bad if the thing doesn't move.
If you know it's going to move big and in which direction, give me a call
If you know it's going to move big, but not sure in which direction, the straddle or a strangle is probably the way to go. You can also consider a ratio backspread, but this will really only allow you to profit much from one direction, although if it moves big in the "wrong" direction, you could make a little depending on how you structure the backspread. Lower risk, lower reward. It's still bad if the thing doesn't move.
If you know it's going to move big and in which direction, give me a call
A good thing to consider is to turn your long positions into a debt spread - sell an equal amount of options with the same expiration 1 or 2 strikes deeper OTM - this will reduce your cost. Your profit potential is also reduced but still in the 100% - 200% range.