15.3 C
New York
Saturday, May 4, 2024
HomeNews
News

Comment by k1

By Single Comment
0
35
psw-placeholder
psw-placeholder

View Single Comment

  1. k1
    November 25th, 2007 at 11:41 pm
    Managing Implied Volatility – Crushes and Rushes

    Optrader: You are not worried of an IV crush on earnings day that will eat your profits on both sides? Wondering if it is a good time to establish a straddle/strangle , especially as IV is high because of Cramer’s pump. Would love to hear what you think.

    Optrader: I should add that I am not arguing about the tactic. Straddles/Strangles are one of my favorite kind of plays: no direction and any kind of big news is good for you: you only get overnight good surprises. But I like to start the positions in a low IV’s environment.

    Dragon: You are right. The risk/reward ratio has changed and this is why you usually cash out completely and then reestablish a strangle with the correct strike prices going into the event. IV crush is always a possibility but with historically volatility off earnings news in JCI, it is of a smaller probability than a volatile move.
    I think it gaps and goes higher after some consolidation thus the AUG esp when demand moves that IV in those calls again.

    Dragon: By reestablishing a new strangle you have better control of the risk capital movements with delta.

    Optrader: Well, you should even take a look at the Jan’s, where IV ATM is at 27% VS 70% for the July’s. It’s more expensive of course, but at least you won’t get crashed on IV drop. You could also buy the Jan’s strangle and sell the Jul’s against it to make it cheaper. Of course that would be a pure IV play, but you can always ratio it.



Stay Connected

157,275FansLike
396,312FollowersFollow
2,290SubscribersSubscribe

Latest Articles

Load more

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither PSW Investments, LLC d/b/a PhilStockWorld (PSW) nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Contact us: support@philstockworld.com

© Copyright - PSW, LLC.

2024