karennma
8,057 posts
msg #90573
- Ignore karennma |
3/30/2010 1:22:13 PM
Just an FYI ....
OptionsHouse is giving a FREE 2-week trial of options coaching.
Call 1-888-620-8714 for info.
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straken
469 posts
msg #90583
- Ignore straken |
3/30/2010 3:49:40 PM
Isn't mary4money running the same special? How did the webinar turn out? Is there any new millionaires in the building.
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abelincoln
126 posts
msg #90649
- Ignore abelincoln
modified |
4/1/2010 11:18:11 AM
....
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abelincoln
126 posts
msg #90656
- Ignore abelincoln |
4/1/2010 1:09:26 PM
could they teach me why I got Rimm'd by Rimm this morning on the Apr70 P
is less than a minute?
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sbuck143
88 posts
msg #90658
- Ignore sbuck143 |
4/1/2010 1:20:12 PM
some more specifics abe?
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abelincoln
126 posts
msg #90709
- Ignore abelincoln
modified |
4/2/2010 2:12:12 PM
err!
an earning play
I saw the sell in the morning of 157,000 shars and the seller sold at .30cents under bid...who takes that kind of discount?
so I dopes out Rimm is going down
the logical play was Apr 70 P...Rimm went down AH
at the open the option spiked up then sank within a minute then drifted down
it's a PUT the stock falls the Put rises...no!
and I knwo it's not near magic friday...
whatdid I miss?
was I supposed to check the option pricing calc on bernies site, just want to learn from mistake
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straken
469 posts
msg #90715
- Ignore straken
modified |
4/2/2010 3:35:56 PM
Straddle demand raised prices in the RIMM at-the-money (ATM) straddle, which in turn raised implied volatility.
To compare how much the straddle was up, look at the March ATM straddle with 16 days to expiration.
RIMM options typically trade around a (30-35 %) implied volatility in non-earnings months. On Wednesday's close, the March 70 straddle (the ATM straddle at the time) was priced at about $3.80, a little over 5% of the value of the stock at the time. This produced an implied volatility of about 31%.
A straddle value of $3.80 means that the surrounding strikes, while still carrying some value, are for the most part not in play.
This is confirmed in the values of the 65 and 75 strike, each being worth less than 50 cents respectively.
Wednesday on the close, the RIMM April 75 straddle traded at $7.30. This was almost twice the value of the March straddle and just under 10% of the value of RIMM. This increase in straddle price produced an implied volatility of 56.5%.
Knowing what we know about RIMMs implied volatility, once earnings come out for RIMM, regardless of the move, RIMM implied volatility will likely revert back to its mean of about 30%-35% This also means that only one strike will be in play after the announcement, because the strikes that are not at the money will have little or no premium after such as your puts. <----dreadfully sorry about that!
Basically, with RIMM trading at $73.97, if the stock doesn't move away from the 75 strike by at least $6, the straddle will be a big loser.
***Now the important part: The RIMM straddle buyers propped up the IV well above normal.
RIMM dropped just under $4 on the open, well short of the of the $6-$7 move needed to break even on the straddle buyers
Implied volatility immediately sold off back down toward RIMM's mean of about 30%-35%. Bringing the April 75 straddle, even with the $3.97 downward move went from $7.30 on the March 31 close to $5.15 on Thursdays open. The straddle was a $2.15 loser. As predicted, there was only one strike in play: the 70 strike, which traded at just under $3.80 (sound familiar March?) If your playing a directional remember
**(Do not chase IV spikes if the rise is due to straddle buyers) MMs will not let the straddle price fall into profit. In a stock like RIMM MMs control the price weighing and remember Implied Volatility is an output of price action not an input as many believe. In this instance with straddles pushing the IV so high so fast and the differential in P/C between the 30th and 31st the best play STO the APR75c or BTO the APR75p the first being my preferred.
If you really want to play earnings its much safer to find less visable companys whose liquidity and EPS growth is improving and have more potential to suprise.
Maybe more than a minute of your time.....but hope it helps.
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abelincoln
126 posts
msg #90737
- Ignore abelincoln |
4/3/2010 1:39:44 AM
thanks for explanation ...learned something new, and tuition paid
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abelincoln
126 posts
msg #90809
- Ignore abelincoln |
4/5/2010 1:42:36 PM
Straken:
"To compare how much the straddle was up, look at the March ATM straddle"
where do you find straddle data?
+++++++++++++++++
watching UNG livecross weekly macd...for breakout
buy/sell good throughout day
waiting for some decay
the Apr 8 C/apr 9 C look good
FMI (for my info)
in regards to IV, (using livevol) how would you put this into context (words)
...and where to look...(i'm looking in uny 8 - 12 days to expiration) and looking inside watchlist display show IV data
thanks
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straken
469 posts
msg #90810
- Ignore straken |
4/5/2010 2:07:40 PM
abe,
I get my data feed from esignal, and my server stores trade data on stock and option traffics for me to refer back to. If you have livevolpro, you can do the old fashion way. Go to the skew tab, change the date at the bottom to 1 or 3 months and click play. Once all the data loads for the skew you can back up to certain days to look at.
If you want just a comparative glance, go to earnings and div tab, there you will find the straddle pricing around earnings and IV movement. You can go back several quarters to. But if you want more detail you have to back up the skew to the appropriate time frame.
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