I bought NVDA call options 200 strike Exp Jan15 2027 at $15.50 when the stock was trading at ~117 1 week later stock is 122 but the option price is $14.95. Something is off. Time decay is not a reason here since it is 2 years away. So what is the problem here? How is it possible that stock is up but the option price is down? Is it the volatility? But then how do you factor that in?
It is volatility. You bought an expensive call when the stock was down. You can factor that in by analysing the stock volatility and considering other option strategies.
I guess by the option when volatility is down sell when it is up? Volatility is measured and available to everyone anyway How do you analyze a stock with volatility factored in?
Like for price, you buy it if you believe it will increase from where it is, sell it if you believe it will decrease. Although mean reverting, timing and structures make a difference. Then there are a lot of dimensions to it. I am not a successful vol trader anyway... just another student, and I find volatility very hard to trade. I just try to capture some in low realised vol environments with some butterflies, otherwise trade some verticals when directional. In your nvda trade for example, I would have preferred a bull call instead of a single leg. Limiting the potential but making it more binary in direction and more vega neutral.
I guess a 4.3% move wasn't enough to outrun the vol crush. I've learned when trading naked options you are really betting on higher vol. Spreads is what you want to trade in high vol securities. I think this is an instance where you could have bought NVDL or NVDU.
Near term turbulence affect vola 2 years away? ! Isn't that free money, sell when stock is down buyback when market calms
That far out in time vega is high, gamma is low, low delta otm too... You could short a turbulence, but it's not free money or free risk. I guess it's mostly vega that far out in time and otm.