Yesterday 375 straddle was 18.40, today 12.78. EDIT: BTW, the 360 straddle was 17.15 when I bought on 7/15, closed it at 29.96.
I must be missing something. I understand selling fat IV against the next month but how could going long an inflated IV option that's going to parity in the AM a wager on implied vol ?
I don't think anyone thinks it was an IV wager. Like Atticus said, it was a bet on whether the post-earns move would outrun the IV collapse.
Well yeh. I was just confused by atticus staing that he didn't think that it was a vol play but the OP could correct him that was his intention. Mis-intention wouldn't have confused me
I was experimenting with aapl earning too Atticus&co, How would you trade this afterhour? I opened below double calendar spread pre-earning. Afterhour aapl hit 405 which i believe is my max profit, unfortunately I am not sure how to lock in the profit with underlying afterhours. By the morning, aapl was down to $387ish and as you can see from my exit, actually ended up with a loss. Kind disheartening trade for me. Was there anything I could have done afterhours to save the profit? Thanks AAPL Aug11 345 Put / JulWk4 345 Put 4 / 4 Debit 2.55 AAPL Aug11 405 Call / JulWk4 405 Call 4 / 4 Debit 3.10 --------------------- AAPL JulWk4 405 Call / Aug11 405 Call 4 / 4 Credit 4.60 AAPL JulWk4 345 Put / Aug11 345 Put 4 / 4 Credit 0.68 ----------------------------------------------------------- I recorded the pre/post earning numbers below to see their behavior, might be interesting for some of newguys AAPL $375 (pre-earning) $387 (post-earning) July PRE: ATM: ~74IV 375C $10.95, 375P $9.35 OTM: ~75IV 405C $1.71, 345P $1.37 POST: ATM: ~30IV 390C $2.3, 385P $2.5 OTM: ~37IV 405C $0.25, 345P $0 August PRE: ATM: ~33IV 375C $15.35, 375P $13.9 OTM: ~33IV 405C $4.5, 345P $3.4 POST: ATM: ~23IV 390C $9, 385P $9.3 OTM: ~23-28IV 405C $4, 345P $1.05
I don't follow your position and numbers. The double calendar looks like a riskless arb and that doesn't compute with your description and the 2nd set of numbers have different strikes. Were the 2nd set just random prices that you observed? Generally speaking, you can eyeball at an etimated post EA risk graph and note where you are on it vis a vis the AH price. Or if you want to be more precise, you can calc your Greeks with your post EA IV estimate. Either way, you can then buy/short shares of the underlying to support the option position. However, that support can be a problem directionally, depending on the nature of the initail option position. For example, the OP did a long 375p/380c strangle for ~$17. Assuming parity, BE is 358/397 so at say 405, shorting 100 shares per would lock in $8 regardless of what AAPL did thereafter. Suppose the option position had been a long calendar, say clairvoyantly at Aug/Jul 405c. The P&L looks like an inverted V with the max profit at 405. Shorting UL at 405 -- 100 shrs or less per calendar -- is fine if AAPL drops but if it continues up, you lose on both positions. So yes, you can adjust but it doesn't necessarily lock in the position. And tho I don't really fathom the P&L spectrum of you double calendar, I surmise that it was similar to my calendar example in that you could support it but that just altered the location of the risk area rather than eliminating it.
Yes exactly that was my question, if it was a strangle it would be relatively easy by shorting the underlying afterhours at certain delta ratio you are comfortable with to lock in profit and you are pretty well hedged if the stock continues to go up. But for a calendar spread, how do you hedge it? You short the underly at delta neutral and tomorrow it gaps on open, you ended up with a double wammy loss. Regarding the numbers, the top was my trade fills, bottom is just some stats i recorded as a snapshot during the day pre/post earning, not related to my trades posted above - two different times of day.