Just bot AAPL DD

Discussion in 'Options' started by Eliot Hosewater, Oct 22, 2007.

  1. Sold Nov 170P/180C and bought Dec 165P/185C for 1.85.

    It's not quite like playing GOOG the day before expiration, but still.

    Let's see what Jobs has to say after the bell.
  2. lwlee


    Double diagonal? You expecting it to range bound between 165 and 185?
  3. wenzi


    So what happens if IV drops from say 55% to 40% after earning?

    Those options seem pretty rich right now, and I thought DD's were long vega.
  4. I'm trying to learn how to play vols. Nov IV is almost 10 points higher than Dec. We'll see how it plays out.
  5. MTE


    It is, yet you cannot just add up Vegas across different expirations.

    The front month IV usually drops more than the back month, so since he's short front month IV and long back month he can still make profit from the IV drop.
  6. Then shouldn't the Nov shorts become cheaper and I can buy them back for less? If the Dec IV drops less then I can still sell them. Aren't you supposed to sell higher IV?
  7. This looks like an interesting trade. I will be watching on the sidelines.
  8. rickf


    Yep, I am paper-trading this DD.....never thought about it before although I've heard of it. Will be interesting to see what happens.
  9. BIDU and ICE report this Thursday, this position might work with them also.
  10. Eliot,

    I have a real bad feeling doing this type of trade with equities before an earnings announcement. With an index, it seems safer. With an equity, 1.85 doesn't seem to be enough to compensate for the 8.15 risk.

    I hope it works out for you though!

    #10     Oct 22, 2007