Why is IV in Sirius so high?
- Thread starter switze22
- Start date
You are missing a key point. You did not get screwed on the CSCO calls, you bought OTM of puts on CSCO which were $2 -$3 away from the strike with a week to expiration left. The IV change was minimal.
Before I would advise you on SIRI calls, I think you really need to understand why your OTM, (in this case 10% OTM!!!) puts lost money a week before expiration when the stock did not drop to your strike. Once you understand that process of deltas and time decay before expiration then you can tackle IV. Then you got the framework for understanding how options work to make better investments decisions.
Your first step to knowledge is to realize that you did not get screwed by CSCO puts. They did exactly what they were supposed to do given the movementin CSCO. YOU, and YOU alone take responsibility for your investment decisions and knowledge of how options work. From there you can learn a lot better.
IV collapse is not your only consideration. The stock has to move for you to profit on this calls if IV drops depending on the strike.
And as the point was made before, buy the stock, it is $3 and change. A perfect $0 strike call with no time value premium or vega risk
and a delta of 1.00.You have no idea what the return will be, but you're only paying 35 cents over intrinsic. Vols are guaranteed to drop, but meaningless if the stock rallies past 3.50 as deltas bail you out.
Don't put too much emphasis on volatility when talking penny stocks. The bid/offer vol is 20bp wide.
Atticus I'm looking at doing a March $4.00 Covered Call on SIRI. Delta is .305 and Vega is .004, Good trade?