IV trading on earnings

Discussion in 'Options' started by DarkProtoman, Jan 22, 2012.

  1. newwurldmn

    newwurldmn

    You seem confused.
     
    #21     Jan 22, 2012
  2. More like its the middle of the night where I am. Anyway, if I'm going to be bullish, why not just buy calls?
     
    #22     Jan 22, 2012
  3. newwurldmn

    newwurldmn

    Without a view on the gamma you are really trading stock with some extreme protection. If you don't want a view on gamma/theta/IV crush then you need to go really long dated. How much does it cost to get the same delta via calls vs. just buying stock?

    Let's see quickly:
    PFE is a $22 stock - so you need $11 to buy 1 share on margin.
    PFE Jan13 $20 calls are 2.7 and you need 1.5 of them to get 1 share of delta. So you will have to put up $4 (non-marginable) to buy 1 share.

    In this case with the dividend being so high I it works out better to buy leaps vs stock. You will pay 5 cents of bid/offer per share equivalent in the LEAPS vs 1 cent in the stock, but that shouldn't be a huge deal.

    But note, you changed your fundamental view like 3 times in this discussion.
     
    #23     Jan 23, 2012
  4. I see. It's better to change your plan then get stuck in a losing trade
     
    #24     Jan 23, 2012
  5. Im confused what is the trade?
     
    #25     Jan 23, 2012
  6. spindr0

    spindr0

    That depends on which page of this chain you read.
     
    #26     Jan 25, 2012
  7. newwurldmn

    newwurldmn

    ha
     
    #27     Jan 25, 2012