¿wth? nflx moved 4 to 14 points in favor of my positions, still barely broke even.

rtw said:
¿how the hell does this happen? i created a directional position, the underlying moves roughly 3% in my favor and ¿i'm supposed to accept that my positions are still losing money, forget about not giving me any kind of profit? this makes no sense, the options i bought still have 2 weeks to expiration and the earnings announcement for nflx is still 7 days away. this is ridiculous, if a favorable 3% move won't make me any money ¿exactly what kind of trade will?
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If you want to make directional bets, then trade the underlying. And if you can't afford to trade the underlying, then don't trade.

And if you're going to try to figure out the whys and wherefores of every option position while its open, then I hope you have a long life because you'll need it.

I've been at this a long time, and I only trade very high volatility instruments. Even so, long options don't work for me, and are very unlikely to work for you.

Best of luck!
 
well, it turns out mr. beerntrading is right.


i went and took a look at the historical data i could find for more or less comparable strike prices for nflx calls expiring on 20180713 versus 20180720.


for the calls expiring on 13-VII, the 420 strike price increased in value by roughly 400% from 5-VII to 9-VII, the 510 by 50% and the 445 by 600%. in contrast, the 495 and 530 calls i bought which expire on 20-VII had almost 0 increase in value from 5-VII to 9-VII and i couldn't find information for the 445 call. calls much closer to the money which also expire on 20-VII did show positive increase in value, although quite muted compared to the options that expire on 13-VII.

i was thinking that paying more for options with longer periods to expiration and which also included an earnings announcement would actually multiply any increase in value from the underlying moving in favor of a directional position. however, it actually seems like these factors incredibly negated this increase in value almost completely. this makes no sense to me but it seems like that's just he way it is.

on 9-VII i bought a far otm call on amzn and even when the underlying moved around 50 points in my favor since the time when i opened this position, i barely managed to break even today. the lesson i have learned is that directional positions need options with deltas as high as possible in order to appropriately capture favorable movements by the underlying instruments.
 
@rtw You really should not have been surprised - I dont have the historical data but as of Friday close

c495 delta 0.0309 theta -0.3275
c530 delta 0.0103 theta -0.1338

The numbers were probably slightly better before but the principle is the same - you spoke of a $4-14 move - the delta's would give you +.12 to + .42 for 495 and +.04 to +.14 respectively, so far so good but you have to subtract the theta (-.33 and -.13 respectively) which sends you pretty much to zero or negative territory. The higher volatility probably benefited your position but it was not enough by a large margin. The position you took wasn't really directional it was a hail Mary pass hoping at a huge move. To put it in context - your c530 requires a 25% rise in NFLX within a week or two - I suppose its happened but it remains rather exceptional.

When I take directional pre-earnings move I will take a delta of between .3-.5 otherwise there just isn't enough bang for the buck. Of course the amount of money you go in is larger and position size is a concern.
 
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