Goog october options will expire tomorrow. At the close today the volatility on the october calls had a range from 82% to around 94%. The November calls volatility was trading from 25% to 30%. Is there any way to divine what volatility will be priced in on the october calls around the open. I will assume that the stock will open 540. Obviously this is a guess on where the stock will open but assuming you had the opening value can you price the volatility. I know it will collapse somewhat, should I look at historical measures or what? I put in a screen shot of the near money strikes I am referring to. Thanks in advance.
Here's a good source for research (not being sarcastic, there is some good research regarding OE activity that can be utilized here). http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1337350
The IV for Oct ATM calls will fall into 30% ~ 40% range 15 minutes after openning, if you want me to bet.
There's no way to know what the opening IV will be. Some collapse quickly, others take a couple of hours to get there. And there's always the morning news wild card. AM numbers are just a guess.
You did not ask, but just in case you own some options. DO NOT ENTER A MARKET ORDER AT THE OPENING. If you want to sell quickly, be ready with a limit order as soon as you see the real quotes. Mark
ok thanks for the replies, lots of things working against a long call position, high theta, volatility crush, etc. I was trying to figure out what the best strike was to buy pre earnings, I am also curious to see where november volatility is on the open.
Don't worry about the theta during the early morning on the OE day, not only the theta won't drop that much, but also there is a good chance it rises a little in the early morning from yesterday's close level. After 10 or 10:30 AM, you will see the theta drops like a stone. The Nov IV will drop a little while the Oct IV will drop to a few pencentage points above Nov IV within half an hour trading begins. All those, of course are just a guess but they are the gusses based on 5 years of earning play experiences. GOOG always releases their earning one day before OE so you might want to check out what happened in the past cases.