was that a black swan for call and straddle sellers in WMT?

wow.

 

This loss would wipe out at least 10 previous winners.

But tastytrade insist on recommending this strategy.

 

The person who prepares your taxes is the best one to answer this question.

You might consider printing out very report form available from your trading platform, and bring that for a relaxed sit-down with the tax preparer, and let them pick.

You might want to do this ASAP, and then schedule a re-do when the 2017 effects of the current tax law machinations are known. There may not be much difference, but any differences will likely be pertinent.

 

Its a bad one but the three previous times they would have collected the full 2.50$ every time so now a year on they are at zero return.

 

On a straddle? I don't think so. You would collect the full premium only if the stock ended exactly on the strike - which was not the case in the few previous cycles.

I August for example on ~2.60 credit they would gain around $100. And this is pretty typical, many times it was even less.

 

10% move in a day. 160% realized volatility in one day... Absolutely a black swan in terms of number of SDs. Also a measure of how illiquid, but that is reflected in the volatility overall.

 

Why would anyone have been short this?

 

With the clear benefit of hindsight. There was probably a ton shorted - but I 'm speculating.

 

The straddle was priced near-perfectly at mean historical earnings move so there must have been sellers. Nice move and a good contributor to dispersion book which is a savior this year

 

I don’t understand who puts trades around earnings that a 10% move can wipe them? Earnings are random - best to just skip this week altogether.