I loaded up on these Options at today's(2/10 tues) end...

Discussion in 'Options' started by increasenow, Feb 10, 2009.

  1. I loaded up on these Options at today's(2/10 tues) end...

    GLD puts
    NDX calls
    OIH calls
    SPY calls
    USO calls

    thoughts?comments?
     

  2. I don't like it. Since IV is still pretty high, especially after today, your calls aren't going to be worth as much as you think due to IV crush, assuming the market drifts up (which is plausible to me).

    And I wouldn't bet against GLD right now. Other than that, what are your expiration months, strikes and exit strategies?
     
  3. GTS

    GTS

    Paper trade?
     
  4. when you say IV is too high..IV on what stock?or option?or?also I thought when IV number is high means that option price will soar when underlying moves...
     
  5. yeppers...through options xpress with realtime quotes...
     
  6. I think you're fighting the market. As long as you don't mind waiting a month, you'll do fine.
     
  7. Implied volatility on the option. It tends to drift down as the price moves up (especially in current market conditions), so your call will be worth less even though you predicted the correct direction of the underlying. That doesn't mean you won't make a profit—just less than you expected. If volatility was still at historic lows, like '04-'07, it probably wouldn't be an issue, but it's on the high side now and mean reversion is going to do its thing.

    The opposite is true when you purchase puts anticipating a drop in the market. Vega and Delta are working in your favor (assuming you make the correct prediction).
     
  8. increasenow,

    Please read up some more on IV. The poster's point is that generally the market's IV is high now, making the premiums paid for purchasing calls and puts more expensive then the same options would be in a calmer market.

    The current IV just gives an indication of how high priced options on a given stock are. If the stock moves alot, the option price can soar or plunge regardless of what the IV was at the time. When people refer to prices rising due to rising IV, that means if the IV moves up after you purchase the options. If IV is high when you purchase options, and then IV falls, you can lose money even if the underlying stock moves somewhat.

    Also BTW in the original post, I don't think you mention the strike price or expiration dates of the options. Makes it kind of hard to judge how good they are (i.e. even a bull on AAPL wouldn't recommend buying 200 Strike Feb calls - so just saying you bought AAPL calls is basically meaningless for example).

    JJacksET4
     
  9. G-Boa

    G-Boa

    USO call has the least risk and most potential out of the bunch, 2 months or so out would be comfortable timeframe. You could make profit on it in a week to ten days.
     

  10. No.

    You are thinking of delta.

    When delta is high, the option price moves almost as much as the stock.

    It's difficult to explain IV when you don't know which factors are involved in determining the price of an option. Let's just say that a high IV means than 'the market' anticipates that the stock will be volatile - either up or down.

    When IV is high it means the option's premium is relatively expensive, compared with when IV is low.

    It has nothing to do with the option price 'soaring.'

    Mark
    http://blog.mdwoptions.com/options_for_rookies/
     
    #10     Feb 10, 2009