IV & MM Which month option is the best to buy when going long a straddle or a strangle? For Example: I have a company reporting 2nd week of Feb. I want to go long a straddle or a strangle in the first week of Jan because IV will rise from 30 to 70 between Jan 10 & Feb 10. Do I buy the Feb, March or April options? Thanks
In general, the price of the option will not rise, it will just stop decreasing at some point. The market doesn't miss stuff like this. IV and MM are talking about gamma scalping--in essence you have an option which doesn't have theta any more. What do you do with that?
the biggest vols spike is always occurs in FEB ( reporting month). Thats where the unusual option's volume action ( read : demand and supply) will be. Having said so , I'm running position model on next (MAR) month vols if xyz is reporting in the LAST week of FEB. IV numbers are to wild with days to exp < 5.
lemme guess , you are taking about ISRG here? FEB strike is not exists yet ,it will be available only on 12/18 and it will open at 50-55vols , so you can forget about 30 , I guarantee it
fronth month vola usually goes higher; look at amat...atm nov calls went up 3fold in 3 days, while dec just doubled.
IV, So is there a way to play the vol spike of a WEBX or ISRG? Also, What is your target return of a strangle / straddle? Thanks
if you're sure about the reporting date, before the feb expiration, feb would be the logical choice, but as was just mentioned you probably will not make a profit just holding the feb straddle, rather i would buy an a the money feb/jan call sprd. let the jan decay (love being short jan...xmas and newyear) and to minimize risk sell the spread right before jan expiration. in and out...if you want to put on some risk...after the vol pop, buy the march feb at the money call sprd, but now you have to hold it through earnings, theoretically the feb should collapse and the march will be your hedge, but if the stocks makes a big move, your spread will go to almost nothing, much more risk, in my opinion, any body want to chime in? always looking for someone to prove me wrong...not ego...looking to learn as always
WEBX is out , I don't see vols rising to previous levels. If conditions are right , I will put the following trade on ISRG : buy 1 atm JAN sell 2 atm FEB buy 1 atm MAR So basically its exactly opposite bet from what you planning to do.
I like double calendars in this case ( OTM and even FOTM)...? can you elaborate...just trying to follow the thread