Last two quarter, more precisely during earning season, I got into short term volatility trading with mixed success, well it is pretty much no gain and no pain either. It felt almost like a gamble, mostly betting with straddles. But my major complain is it is to infrequent, only 4 times per year,.. now today I bought near term (expiring tomorrow) ADSK options for just few cents just below atm, which means just probably about 5-6% movement should cause tremendous movement in price. Normally for straddle I sense based on my short experience, minimum of average 10% after earning call just to cover the loss on one side of straddle and it also looks pretty risky had the volatility not materialize. So I thought to increase the frequency b buying a just one or two days prior to exploration and identify potentially volatile stock ( which means no longer a night before earning), that would increase the frequency to4 times per year to 12 / year. How does it sound? Does it look feasible?
No... I think you shouldn't mix up an earnings play with a normal expiration... What's your reasoning in thinking Autodesk is going to move 5-6% tomorrow? And, did you buy the straddle or just calls? IMO, to buy the straddle 1 day before expiry with nothing really happening, is more a gamble than a strategy. I mean, you're basically hoping for a decent gap... If the gap is just 1 or 2%... are you going to gamma trade? Or let it run? Because there's a good chance ADSK is ending up exactly on 110 strike at expiry. The open interest is decent compared to other strikes, so there will be people wanting to have expiry exactly on it. Why is there a large chance it will expire on 110? Because the people that are short that strike, are aiming for that... And the people that are long that strike will likely trade the relatively large gamma, buying stock delta's below 110 and selling above 110, therefore creating a push and pull towards the strike.