i am starting to play more volatility game during earnings. In hte past did mostly played long term. Sort of itching. Now I got a list of all earnings date lined up for companies I wanted to play with and just before earnings day, I buy a put/calls that are expiring soonest to maximimize the gain. Now considering the fact that the options last its most of its value during last month in an exponential manner keeping everything else same, I am wondering if time value can noticeably decreased intra-day. For example, X corporation about to announce earning result on Y date's after close at around 2PM Pacific time. By Eastern time that is after market close. Now if I decided to choose between purchasing the option at Y date's morning around market opening vs. purchasing it just before market closing, will be there be a significant price movement considering everything else equal? I know it is hard predict considering so many factors influencing the option price during intra-day trading but I am just wondering if there is any methodology for measuing intra-day price plotting or movement in terms of time value.
I think you need to first consider the that you are buying these options at peak implied volatility - in this case, the vol crush will have more impact on your results in this than intraday time decay will.
i understand, i am talking here about time decay, not considering anything else if you will to see if buying at closing vs. opening on same day makes a difference. If time decay DOES make a significant difference, (obviously if it does it will decreased towad end of day making it cheaper to buy), then i opt for buying toward EOD.
When the timeframe of your trade is that small, the effect of theta and vega are dwarfed by the effect of gamma.
I am not sure. Most of his books kinda contain the same topics BUT presented differently. The earnings chapter you seek is in one of the books- one that I read a while back but did not record the title. I would go into amazon and read the reviews and see if that topic is mentioned. That beign said. most of his books are really good- grounded in stats... none of this "sell otm puts and turn the market into an ATM machine hype that is all over the 'net.
If the stock you're looking at is a high vol on earnings one, that would mean the IV will be bid up more or less continuously from about 1 to 2 weeks before earnings... depending on when earnings fall in time to expiration. For instance, if stock A (big mover on earnings) has earnings 1 or 2 days before expiration, those soon to expire options will be bid and possibly don't lose any value due to time decay. If the stock usually moves 10 % on earnings... the ATM straddle should be doing about 10%. Which means IV will be about 90 one week before expiry, and 140 the day before earnings.
yes one thing i forgot to consider was that it applies ATM or near ATM, once OTM or ITM time value i significant.