Okay, I'm Drowning In Data - Please Help Me

Discussion in 'Data Sets and Feeds' started by ByLoSellHi, Sep 24, 2006.

  1. I'm trying to organize a tsnunami of data into useable information that would help me develop a profitable (and logical) put/call system.

    I am just being overwhelmed by volumes of information.

    Let me give an example of my dilemna:

    Prior to earnings' releases, I'm trying to enter into some straddle and strangle positions on volatile stocks that I believe have a good shot and diverging from expectations.

    1) I check for high beta stocks

    2) I check for those about to report 3Q

    3) I price OTM, ATM and ITM calls and puts

    4) I subjectively pick those stocks that I feel strongly about (one way or the other)

    5) I calculate needed moves up or down (as %) to make profitable straddle/strangle positions work

    In doing all of this, I feel overwhelmed, because their is so much data.

    Can anyone suggest a way to help me manage what seems like overwhelming data more efficiently?

  2. I can't help you with the info overload, but I will say if you don't account for the volatility crush after earnings, you will be disappointed.
  3. You want to be long-premium the week before the announcement. You'll want to offset or reverse to being short-premium right before the announcement. Vol rises before and gets "crushed" after the news release. That's the primary course of events.
  4. Right.

    I'm trying to get positioned quickly before earnings or earnings' warnings.

    Am I right that straddles and strangles are the best option plays right now?

    Am I also right if I don't want my net debit on such plays to exceed 7% or so of the share price?

    Otherwise, the share price has to move 6% plus the price of my premiums paid for me to begin to break even.

    Thanks again.
  5. WRONG! You want to be "long" the strangle one week before the announcement. You expect to benefit from increasing volatility(vega), not price movement(delta & gamma). Offset the long position BEFORE the announcement. Then stay flat or get "short" the strangle and then expect to benefit from the "vol crush"(vega) that is expected to take place after the announcement. You're playing it both ways.
  6. Thanks nazz.

    I really appreciate the help.
  7. billp


    Thanks too nazzdack. May just get back into options after this.:)
  8. MTE


    Where's info overload? I don't see it.

    It's really simple, IV rises going into announcement and gets crushed on announcement. So, if you buy in advance then you're playing rising volatility and want to get out before the announcement and if you buy just before the announcement then you are playing the move and it doesn't matter whether that move is 6%, 7%, 10% or 1%, the only thing that matters is that the move is greater than what the market expects.

    Sounds simple, huh!? Well, it is in theory, but not in practice.

    Good trading!:cool:
  9. Drowning in data?
    Swim UP toward the light.
    You need some air.