Calendar trade from Maverick

Mav,

NTAP reports tonight and shows skew similar to OVTI.

 

Yeah, one thing though, doing these ahead of earnings can be very risky, not so much because of the vol implosion that you might get on the back months but because of the price gap. NTAP and OVTI are very similar.

I found some great ones that you can hold through expiration that will not have earnings reports before, these are much better. I'm not going to post these until next week though since I am not in them yet. LOL. I'm not in OVTI either, don't like to hold through earnings. I just wanted to give an example of some nice skews out there. I didn't realize there was so many of them right now. LOL. So OVTI may not be the best example, I still think that play will work out nicely as well as NTAP.

 

Also depends on what they're using for the risk-free interest rate.

 

All of the sites have HV within tenths of each other. Using a CBOE calculator I changed the risk free from 1% to 2%, and like rho, it didn't account for even a 1 point change. I used the bid and ask and last price in succession and that didn't make much diff either.

ValuLine and IVolatility had the closest to Mav's numbers. I have another calculator at home I can plug in numbers to and see what's up.

Btw, Mav.... where did your IV come from?

Thanks guys for your help.

 

The vols today on OVTI are between 110 and 140 so your numbers look right. They might be off due to different pricing formulas being used. I am getting my vol data from optionvue.

 

NTAP up about 10% after reporting. Interesting to see what happens to the calendar spread tomorrow.

 

I'll tell you what will happen right now, those front month vols are going to 0. Congrats to whoever put that spread on.

 

It makes a bit more sense now I think. Your reply made me realize that ValueLine and IVolatility vols were based on EOD data from Friday, while IB and OptionsXpress vols were based on the current price of the option. Thank you for the help and I'll be testing this out further tomorrow.

 

This is to riskarb, Mav or anybody else who's traded around earnings. How fast do you notice that vols come in after announcements? Is it that day or is it over a couple of days? Or is it near instantaneous? Thanks for posting the trade Mav.

 

How do you exit this type of trade? Do you leg out, close the whole thing when the vol's lose the skew or what? I like to take profits on the front month and hang on to the rear, but if the underlying pops like NTAP did that is hard to do.