D2F1D0 said:
A lot of AMZN call holders are going to learn a tough lesson tomorrow on IV and options premium, most likely.
1) I don't understand the implied volatility part. I thought volatility was good for options trading?
2) how does the options premium hurt different than say a call being actioned?
Suuuper noob here.
I gave you a hypothetical, let me now put some numbers to it
Yesterday, pre-ER, AMZN 3450C for 2/12 was trading $70-$90 yesterday, depending where you bought it.
Overnight the stock barely moved, but upon open that same exact call was about $40. Nothing barely changed overnight and you almost got a 50% haircut. This is why when you're at a binary event like earnings you have decisions to make. Rarely do you want to go in naked with no negative delta side coverage.
I didn't get the move I wanted, but I bought butterflies which is a buy / 2x sold / buy, so I have 2 longs and 2 shorts. With BOTH of these getting the same IV haircut, my overall value (the difference in the prices at the strikes) was minimally effected.
This is why advanced strategies like spreads, condors, iron condors, and butterflies are beneficial at a Binary event.
***If this post is on Business and Investing, take it with a grain of salt. I am wrong way more than I am right (but I am less wrong than I used to be) and if you follow me you will be too.***
B&I Key:
ETH - Extended Trading Hours --- RTH - Regular Trading Hours
ORH - Opening Range (1st 30min) High --- ORL - Opening Range Low
R1, R2, R3 - Resistance 1, 2, or 3 --- S1, S2, S3 - Support 1, 2 or 3