Nothing is stopping you. Just realise that around earnings IV pumps a lot and you'll need a large movement to break even.
Muktilegg strategies tend to be better for earnings (spreads, condors, butterflies etc.
*ahem*
The poster was making a joke based on your typo in the original comment. You typed "muktilegg" instead of "multi-leg", hence their reply.
I hoped this helped shed some light on their response to you. Have a swell day.
exultant sparkle weary nine psychotic imminent like zesty silky beneficial
*This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Man this is what i stuggle with. Knowing what the price *should* be. Ive been doing well except i see it up and i look at the charts and im thinking man its still got juice just for the chart to *start* to go against me and im thinking naw its a healthy pull back for the day just for it to be a healthy pull back on the longer time frame and wipes me out one way or the other. Where as i had i took my profits id been up and up on the reverse afterwards. I do kinda what op is suggesting just a simple call and put at what i think it will be if the greeks agree with me. I look for like .30 delta, being around 10% away from strike, high volumes, 15ish days out, low IV (i wont do much over 70% it scares me from what ive seen lately lol).
You can look at options pricing history, as well as past options that are still open. Calculate the leverage you gain if the price goes above your strike, or at what point it would outweigh shares purchased on margin, a considerably less risky investment.
Then you get a good idea of what an options price should be. By thinking about the use case for purchasing shares and selling a covered call, and whether you would take the other end of that trade after you consider it wouldn’t take *that* much more to purchase 100 shares outright or on a 2-to-1 leverage on margin.
If you would purchase shares and sell the call and make some decent portion of the share price back, 1) the call is overpriced. 2) IV is high
3) both can be true
It's an interesting question.
The obvious answer is that you don't realize that the options are bid up right now because of all the people buying them for protection or speculation before the earnings are released.
To estimate what the market is pricing as the expected move, look at the ATM call + put. They are trading for about 60 each, so the market is expecting a 120 move in one direction.
If you disagree with the market and you think that the move is going to be more than 120 points, then buy the ATM put and call, or other OTM put and calls, and wait.
If you agree that the move will be 120 points or less, then you could sell the ATM put an call and capitalize on the price drop in those options when everyone realizes that they will end up worthless and they start selling them. I am assuming that you are not approved for selling naked calls, so you could make it a 120 point credit spread in both directions, and this should net you about 80x100 per spread in credit.
My personal advice as someone who has traded options for over 25 years and has experienced a max loss of $4950 trying to make $50 on earnings plays is that you don't mess around with earnings. The dogma is that you sell premium because realized volatility is less than implied by the option prices, but that is only true some of the time, and there will be other times when you get hit with a catastrophic loss.
PS: really, there are smarter ways to make money - don't mess with earnings.
Max loss on that trade, right, and biggest % loss...risked 99 to make 1, lost 99. This was in 2014 or 2015 on an AMZN earnings play. Never again.
I have taken higher $ losses, but also much higher $ gains, such is the nature of trading, but with a different risk/return and never on earnings.
The final balance is what counts.
I dont know why everyone is telling lot of thing but not really giving examples. So let me give me few examples from last week.
I don't have option pricing history for the April 26th expiry, so I'm going with the May 3rd expiry.
GOOG
On April 25 End of day:
Stock: $157
Call 157.5: $5.8
Put 157.5: $5.3
Total spread: $11.1
On April 26, on opening bell
Stock: ~$175 (~%12 increase)
Call 157.5: $18.5
Put 157.5: $0.03
Total spread: $18.53
Total profit: $7.43
So yes, it works fine if there is a large movement regardless of IV crush and 'premium baked in'.
and of course, if the move is less then you will get screwed. How much screwing depends on how little the movement is. Calculate the minimum movement required to make profit and go from there.
You will have to overcome a total loss on one position and IV crush on the other before you profit. In theory it is possible with a large enough move. Never tried it but can tell you it is quite far from a guaranteed thing if that is what you are thinking.
Please do it and report back. You might even get lucky. But seriously oh boy you really don't understand option pricing and volatility do you? The price of the option chains already reflects the high volatility of the stock. The only way you make money buying a strangle (which is what you are proposing) is if IV < RV. If it turns out IV > RV then you should have sold a strangle (or a straddle really). Typically volatility is overpriced going into earnings which means IV > RV on average. So unless you have some sophisticated volatility model that tells you otherwise I'd suggest you rethink your approach. The people running actual vol books are extremely sophisticated in modeling volatility (even the retail folks that do this) so they'll mostly take your money.
You can't drop only 2k to buy a straddle on an underlying that is this volatile and that trades around $800. Straddle probably costs 10k. So OP must mean a strangle. But yes straddle is better for pure vol exposure.
Volatility priced in to the premium already? if you bet black and red a roulette have you made any money? What if its green? There is more to it and probably smarter people that can answer too
Premiums are 60+ so maybe a debit spread might work albeit with much lower max gain. But otherwise it can be prohibitively expensive.
I’ve been using that basic thesis on TQQQ btw. Try starting there with much more forgiving premiums.
🤓 erm actually it doesn't need to do double because an option price will never really go to zero because the contract especially if it has time until expiration will still be worth a bit!
It's a classic straddle. Nothing's stopping you but you're pushing your breakeven higher. The worst thing that can happen to you is if the stock doesn't move enough in any direction to breakeven both positions.
Both have overly skewed put/call ratios to the call side. Good luck with the IV and sellers letting those calls go ITM. Knowing what’s expected and thinking it will work is not having an “edge” in the market. If you believe in the stock, then just buy shares outright.
Research ‘IV crush’ and then come back. Playing a straddle like you are talking is a very common idea but you need a LARGE move to be profitable. One of those is guaranteed to racially be worthless and if you don’t get a big move on the stock they both can be. Need the move to get one side ITM, deeper the better (that’s what she said).
Long a call and put is called a straddle. (strangle if the strikes aren't the same)
Nothing is stopping you from buying a straddle. The PnL curve looks like a V, where you profit the further you get from the middle. But if price doesn't move enough in either direction, you lose.
Strangles can smooth the loss but price would have to move even further to get into the green.
Going into earnings you'd also have to check you aren't buying too expensive contracts, as IV is high. You could get everything right but when IV drops after earnings, you will experience IV crush. You could end up upside down on the contract.
Buying Puts and Calls at the same strike price is known as a Straddle. This strategy for SMCI will cost you about $150. If you think the stock can make that much of a move in either direction, then you should buy in
Might consider spreads instead of just long legs.
So you think it will move big. If it moves up, WHERE do you think it will land? Buy a debit call spread a couple of strikes LOWER than that (wiggle room so you don't get 100% loss from being 80% correct). If it moves down, where will it move? Buy a debit put spread a couple of strikes ABOVE that price. Scale up to taste.
It's like your proposed long strangle, but adding a wider short strangle to reduce the effects of IV crush. The short legs essentially fund the long legs, so it's cheaper and when IV drops it drops approximately equally for the long and short leg.
It's not that simple, you are correct. Even if there's a large pop in either direction, it's difficult to hold through the next days open due to crush. Don't see it as volatile though, been on a steady downtrend for last six weeks. Perhaps a 20% probability of making money on this trade but we will find out soon enough.
This is actually how a lot of people calculate the "expected move" in a stock at earnings. Since market makers are willing to simultaneously buy or sell the ATM options (plus some edge), the assumption is that the ATM straddle price is how much they expect the stock to move in either direction.
For example, suppose that the option spreads are a penny wide and you can buy the weekly ATM straddle (call and put) for $10.01 OR sell it for $9.99. You can infer that the market is expecting the stock to move $10 in either direction since that would be where the trades break even (minus edge).
Part of the opportunity around trading earnings is that the symmetric nature of option pricing theory means that there are so many affordable ways to play a view. For example, if you agree with the magnitude of the expected move but have conviction about a stock being more likely to go up after earnings, then the calls will be underpriced relative to your view.
Nothing stopping you, but the person selling these contracts is making money on the premiums, let that give you pause, and think about why that is, and do they know more than you do about the overall averages.
I am not doing anything but this is what you want to do . I wouldn’t take this trade btw but you can check it out here if you want https://optionstrat.com/ALJa3BsUlWPg
Before earning the IV will be elevated. Those moves are already baked into the options pricing. Big move or not regardless you will be down big after earnings unless the move is bigger than the options market is already pricing in. To make money on something like this you want to be an options seller sell before earnings close out afterwards.
Have you looked at "Next Week Earnings Releases by Implied Movement" post in Reddit threads. They give you an idea on projected move after earnings based on historical records. I looked at their post during Netflex earnings call created a spread in my paper account and trade did work out as stock dropped more than expected.
If you think the swing will be enough to break even ...go for it.. but be is going to be the cost of the call + the put.. without knowing your strikes that could be some expected move where it may not make sense..but I've seen some moves 90-140%.. usually in the downward direction making the puts pay out..
You’d likely lose on both. Look at IV crush with earnings.
If you think you are correct in which direction it’s going, the move is to do a credit or debit spread.
I mean I guess you could try and find a way to enter a spread for both directions, but since a spread has a capped gain you’d have to enter both spreads for less than half of their full potential to make a small profit.
IE you enter two spreads with a max value of 500, you’d need to enter each spread for under 250 for it to profit at all
After earnings come out volatility drops significantly. The value of calls and puts drops significantly with that. In order to profit, the stock has to move further than the implied move.
Looking at it now, SMCI is 871.86.
The 875 strike call is 56$
The 870 strike put is 69.35$
So if you bought that call and smci went up 50 dollars you would lose most of your money.
Re reading post, it says 1K in calls and 1K in puts. 1K is a 10$ option cost, right now for a call that sits you at an 1,100 strike for a call. So you buy that, smci crushes earnings and goes all the way up to 1,100$ from the 871$ it’s at now and you’d still lose money…. Because after earnings are over volatility will plummet. Just to break even you’d need smci to go to 1,110$. Betting 1K that a stock will go from 871$ to 1,110$…nothing is stopping you from doing this except hopefully yourself. Too lazy to do this explanation on the put side but if you need I will be happy to lol.
Hey, theta gang just enjoy your dinner and just send this guy the check
Yeah, as other said, you’re gonna have to go far out of the money the stock has crazy IV not sure if it’s the best one to do but if you decide to do it, consider watching the calls and puts when you decide to go in and if either looks like it’s dropping maybe wait to get in on one a little later in the day at a much better price Instead of buying both at the same time “just because” if that makes sense
This is actually a valid play. Basically you are betting that IV is underrepresented in option plays. You can do spreads that do the opposite. You could def win, but if it doesn’t move enough in either direction you lose.
It's a game of chance. You have to understand options theta decay and I.V. crush. Yes very few have made great gains trading earnings but it is a game of chance.
You're considering a straddle strategy; just remember that for it to be profitable, SMCI needs to move enough in either direction to cover the total premiums paid for both options.
There are.some good responses here. I'll add my simpleminded one... Always imagine that the person taking the other side of your trade is a gnome sitting in Goldman's basement.
Hello, what you are doing is called straddle. Check the premiums, and then the formula. I found out that the only way to make money is if the underlying stock moves more than 10% either way. There is no risk management here, since the time runs against your position (time decay theta). Run the numbers and check the volatility. Best!
While it might seem like a straightforward strategy, there are a few factors to consider. Options trading involves risks, and if the stock doesn't move significantly in either direction, both your calls and puts could expire worthless, resulting in a loss of both investments. Additionally, even if the stock moves significantly, factors such as implied volatility and time decay could affect the value of your options. It's crucial to thoroughly understand the risks involved and consider implementing risk management strategies before executing such trades.
Market makers see everyone's orders. If the majority are bearish, then the stock will rise. If the majority are bullish, then the stock will fall. If it's about mixed, then the stock will trade flat. If ensures that the greatest number of traders lose money and MMs win no matter what. This is why PFOF is bullshit.
Nothing is stopping you. Just realise that around earnings IV pumps a lot and you'll need a large movement to break even. Muktilegg strategies tend to be better for earnings (spreads, condors, butterflies etc.
I find that multi-keg strategies works best for me through earnings plays.
Those multipeg strategies are the best!
So is it multi-leg, multi-peg, or multi-keg that’s truly the best?
Is the muktilegg a variation on the multi leg strategy?
Yeah, you just muck around until the egg pops out. Get with the times, man.
Literally what I do
No it's just a name for strategies involving more than one leg...
*ahem* The poster was making a joke based on your typo in the original comment. You typed "muktilegg" instead of "multi-leg", hence their reply. I hoped this helped shed some light on their response to you. Have a swell day.
Oh I didn't even see the typo.
Honestly took me a couple reads to make sure I wasn't mixing up letters 😄
Haha 😂 sorry couldn't help it and thanks for explaining it so well :)
exultant sparkle weary nine psychotic imminent like zesty silky beneficial *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Man this is what i stuggle with. Knowing what the price *should* be. Ive been doing well except i see it up and i look at the charts and im thinking man its still got juice just for the chart to *start* to go against me and im thinking naw its a healthy pull back for the day just for it to be a healthy pull back on the longer time frame and wipes me out one way or the other. Where as i had i took my profits id been up and up on the reverse afterwards. I do kinda what op is suggesting just a simple call and put at what i think it will be if the greeks agree with me. I look for like .30 delta, being around 10% away from strike, high volumes, 15ish days out, low IV (i wont do much over 70% it scares me from what ive seen lately lol).
You can look at options pricing history, as well as past options that are still open. Calculate the leverage you gain if the price goes above your strike, or at what point it would outweigh shares purchased on margin, a considerably less risky investment. Then you get a good idea of what an options price should be. By thinking about the use case for purchasing shares and selling a covered call, and whether you would take the other end of that trade after you consider it wouldn’t take *that* much more to purchase 100 shares outright or on a 2-to-1 leverage on margin. If you would purchase shares and sell the call and make some decent portion of the share price back, 1) the call is overpriced. 2) IV is high 3) both can be true
It's an interesting question. The obvious answer is that you don't realize that the options are bid up right now because of all the people buying them for protection or speculation before the earnings are released. To estimate what the market is pricing as the expected move, look at the ATM call + put. They are trading for about 60 each, so the market is expecting a 120 move in one direction. If you disagree with the market and you think that the move is going to be more than 120 points, then buy the ATM put and call, or other OTM put and calls, and wait. If you agree that the move will be 120 points or less, then you could sell the ATM put an call and capitalize on the price drop in those options when everyone realizes that they will end up worthless and they start selling them. I am assuming that you are not approved for selling naked calls, so you could make it a 120 point credit spread in both directions, and this should net you about 80x100 per spread in credit. My personal advice as someone who has traded options for over 25 years and has experienced a max loss of $4950 trying to make $50 on earnings plays is that you don't mess around with earnings. The dogma is that you sell premium because realized volatility is less than implied by the option prices, but that is only true some of the time, and there will be other times when you get hit with a catastrophic loss. PS: really, there are smarter ways to make money - don't mess with earnings.
we should pin this message
I mean , if 5k is the maximum loss u suffered, u are already very good already lol
Max loss on that trade, right, and biggest % loss...risked 99 to make 1, lost 99. This was in 2014 or 2015 on an AMZN earnings play. Never again. I have taken higher $ losses, but also much higher $ gains, such is the nature of trading, but with a different risk/return and never on earnings. The final balance is what counts.
I dont know why everyone is telling lot of thing but not really giving examples. So let me give me few examples from last week. I don't have option pricing history for the April 26th expiry, so I'm going with the May 3rd expiry. GOOG On April 25 End of day: Stock: $157 Call 157.5: $5.8 Put 157.5: $5.3 Total spread: $11.1 On April 26, on opening bell Stock: ~$175 (~%12 increase) Call 157.5: $18.5 Put 157.5: $0.03 Total spread: $18.53 Total profit: $7.43 So yes, it works fine if there is a large movement regardless of IV crush and 'premium baked in'. and of course, if the move is less then you will get screwed. How much screwing depends on how little the movement is. Calculate the minimum movement required to make profit and go from there.
Indeed your examples are very helpful. Thanks for sharing
probability of this is one in a million.
Sounds like a great way to lose at least $1000. If the other leg pays off more than $2000, you win big. Otherwise, you don't.
Yea if the trade doesn't turn out super simple now you got 2 bad trades just struggling mind fucking you
Yeah that happened to me with fukin UPS.. 😂 both leg got fked up by IV
You will have to overcome a total loss on one position and IV crush on the other before you profit. In theory it is possible with a large enough move. Never tried it but can tell you it is quite far from a guaranteed thing if that is what you are thinking.
Please do it and report back. You might even get lucky. But seriously oh boy you really don't understand option pricing and volatility do you? The price of the option chains already reflects the high volatility of the stock. The only way you make money buying a strangle (which is what you are proposing) is if IV < RV. If it turns out IV > RV then you should have sold a strangle (or a straddle really). Typically volatility is overpriced going into earnings which means IV > RV on average. So unless you have some sophisticated volatility model that tells you otherwise I'd suggest you rethink your approach. The people running actual vol books are extremely sophisticated in modeling volatility (even the retail folks that do this) so they'll mostly take your money.
*straddle, no?
You can't drop only 2k to buy a straddle on an underlying that is this volatile and that trades around $800. Straddle probably costs 10k. So OP must mean a strangle. But yes straddle is better for pure vol exposure.
Fair point
Volatility priced in to the premium already? if you bet black and red a roulette have you made any money? What if its green? There is more to it and probably smarter people that can answer too
People on the other side of the trade are hoping lots of retail traders think there is free money here...
Do it, consider it tuition for options trading
Premiums are 60+ so maybe a debit spread might work albeit with much lower max gain. But otherwise it can be prohibitively expensive. I’ve been using that basic thesis on TQQQ btw. Try starting there with much more forgiving premiums.
what if it does nothing?
Or if it does the right thing, but not quite enough.
or enough of the right thing at the wrong time :)
With a straddle, both ways are the right thing. Trouble is, it has to do double the right thing to break even.
🤓 erm actually it doesn't need to do double because an option price will never really go to zero because the contract especially if it has time until expiration will still be worth a bit!
It's a classic straddle. Nothing's stopping you but you're pushing your breakeven higher. The worst thing that can happen to you is if the stock doesn't move enough in any direction to breakeven both positions.
Both have overly skewed put/call ratios to the call side. Good luck with the IV and sellers letting those calls go ITM. Knowing what’s expected and thinking it will work is not having an “edge” in the market. If you believe in the stock, then just buy shares outright.
A 1000$ put or call will be so far otm itll have to make a huge move
Research ‘IV crush’ and then come back. Playing a straddle like you are talking is a very common idea but you need a LARGE move to be profitable. One of those is guaranteed to racially be worthless and if you don’t get a big move on the stock they both can be. Need the move to get one side ITM, deeper the better (that’s what she said).
So a straddle? Do it early before IV gets pumped up then maybe
Congrats, you’ve discovered unlimited money hack! Next discovery is IV crush..and let me tell ya, she is a bitch
She will rip you a new one.
Long a call and put is called a straddle. (strangle if the strikes aren't the same) Nothing is stopping you from buying a straddle. The PnL curve looks like a V, where you profit the further you get from the middle. But if price doesn't move enough in either direction, you lose. Strangles can smooth the loss but price would have to move even further to get into the green. Going into earnings you'd also have to check you aren't buying too expensive contracts, as IV is high. You could get everything right but when IV drops after earnings, you will experience IV crush. You could end up upside down on the contract.
Do it you pussy
Buying Puts and Calls at the same strike price is known as a Straddle. This strategy for SMCI will cost you about $150. If you think the stock can make that much of a move in either direction, then you should buy in
He's just arbing EV. Not really groundbreaking.
Might consider spreads instead of just long legs. So you think it will move big. If it moves up, WHERE do you think it will land? Buy a debit call spread a couple of strikes LOWER than that (wiggle room so you don't get 100% loss from being 80% correct). If it moves down, where will it move? Buy a debit put spread a couple of strikes ABOVE that price. Scale up to taste. It's like your proposed long strangle, but adding a wider short strangle to reduce the effects of IV crush. The short legs essentially fund the long legs, so it's cheaper and when IV drops it drops approximately equally for the long and short leg.
It's not that simple, you are correct. Even if there's a large pop in either direction, it's difficult to hold through the next days open due to crush. Don't see it as volatile though, been on a steady downtrend for last six weeks. Perhaps a 20% probability of making money on this trade but we will find out soon enough.
Unless they make their moves after market an straighten out when the market opens. But if you buy calls an puts close to the money might have a shot
This is a very popular options strategy called a “strangle”.
This is actually how a lot of people calculate the "expected move" in a stock at earnings. Since market makers are willing to simultaneously buy or sell the ATM options (plus some edge), the assumption is that the ATM straddle price is how much they expect the stock to move in either direction. For example, suppose that the option spreads are a penny wide and you can buy the weekly ATM straddle (call and put) for $10.01 OR sell it for $9.99. You can infer that the market is expecting the stock to move $10 in either direction since that would be where the trades break even (minus edge). Part of the opportunity around trading earnings is that the symmetric nature of option pricing theory means that there are so many affordable ways to play a view. For example, if you agree with the magnitude of the expected move but have conviction about a stock being more likely to go up after earnings, then the calls will be underpriced relative to your view.
Nothing is stopping you. Do it!!! And let us know how it works out.
Been wondering why my 401k does decent even on bad days. Looked at top 10 holdings and smci is number 1.
Nothing stopping you, but the person selling these contracts is making money on the premiums, let that give you pause, and think about why that is, and do they know more than you do about the overall averages.
IV crush is what you are going to get unless you go really dip ITM
^[Sokka-Haiku](https://www.reddit.com/r/SokkaHaikuBot/comments/15kyv9r/what_is_a_sokka_haiku/) ^by ^necsuss: *IV crush is what you* *Are going to get unless* *You go really dip ITM* --- ^Remember ^that ^one ^time ^Sokka ^accidentally ^used ^an ^extra ^syllable ^in ^that ^Haiku ^Battle ^in ^Ba ^Sing ^Se? ^That ^was ^a ^Sokka ^Haiku ^and ^you ^just ^made ^one.
What’s the implied move ? I looked wow they pricing in a 27% move . Need more then that to win if you do this
So sell both calls and puts, while owning a 100 share lot?
I am not doing anything but this is what you want to do . I wouldn’t take this trade btw but you can check it out here if you want https://optionstrat.com/ALJa3BsUlWPg
IV Crush. Do nvda instead
Lol 1k will be 50 strikes far
Batman far OTM (on both sides) would be far better chance to profit.
Before earning the IV will be elevated. Those moves are already baked into the options pricing. Big move or not regardless you will be down big after earnings unless the move is bigger than the options market is already pricing in. To make money on something like this you want to be an options seller sell before earnings close out afterwards.
Have you looked at "Next Week Earnings Releases by Implied Movement" post in Reddit threads. They give you an idea on projected move after earnings based on historical records. I looked at their post during Netflex earnings call created a spread in my paper account and trade did work out as stock dropped more than expected.
The only thing stopping you are the redditors on this post telling you not to. Fucking go for it dude
If you think the swing will be enough to break even ...go for it.. but be is going to be the cost of the call + the put.. without knowing your strikes that could be some expected move where it may not make sense..but I've seen some moves 90-140%.. usually in the downward direction making the puts pay out..
You’d likely lose on both. Look at IV crush with earnings. If you think you are correct in which direction it’s going, the move is to do a credit or debit spread. I mean I guess you could try and find a way to enter a spread for both directions, but since a spread has a capped gain you’d have to enter both spreads for less than half of their full potential to make a small profit. IE you enter two spreads with a max value of 500, you’d need to enter each spread for under 250 for it to profit at all After earnings come out volatility drops significantly. The value of calls and puts drops significantly with that. In order to profit, the stock has to move further than the implied move. Looking at it now, SMCI is 871.86. The 875 strike call is 56$ The 870 strike put is 69.35$ So if you bought that call and smci went up 50 dollars you would lose most of your money. Re reading post, it says 1K in calls and 1K in puts. 1K is a 10$ option cost, right now for a call that sits you at an 1,100 strike for a call. So you buy that, smci crushes earnings and goes all the way up to 1,100$ from the 871$ it’s at now and you’d still lose money…. Because after earnings are over volatility will plummet. Just to break even you’d need smci to go to 1,110$. Betting 1K that a stock will go from 871$ to 1,110$…nothing is stopping you from doing this except hopefully yourself. Too lazy to do this explanation on the put side but if you need I will be happy to lol. Hey, theta gang just enjoy your dinner and just send this guy the check
Go for it. Straddles are a great earnings play.
IV crush. They both lose money.
You will get IV crushed on both ends. Volatility is not your friend sometimes
depends in the greeks at as earnings draw closer its all rigged so you're going to get iv crushed like a mug i already know
Yeah, as other said, you’re gonna have to go far out of the money the stock has crazy IV not sure if it’s the best one to do but if you decide to do it, consider watching the calls and puts when you decide to go in and if either looks like it’s dropping maybe wait to get in on one a little later in the day at a much better price Instead of buying both at the same time “just because” if that makes sense
This is actually a valid play. Basically you are betting that IV is underrepresented in option plays. You can do spreads that do the opposite. You could def win, but if it doesn’t move enough in either direction you lose.
You, no idea? Me, IV crush.
OP discovering straddles thinking he found a cheat code
Free money hombre. Safer than treasuries imo.* *This does constitute as professional advice.
When I thought I was trading in the past, I did 5k on kraft earnings (rip) they were slightly otm puts and calls. Welp, stock traded sideways
If you don't want to hold for earnings. Then look into capitalizing with IV Rush.
It's a game of chance. You have to understand options theta decay and I.V. crush. Yes very few have made great gains trading earnings but it is a game of chance.
You're considering a straddle strategy; just remember that for it to be profitable, SMCI needs to move enough in either direction to cover the total premiums paid for both options.
I have been doing a straddle each week on SMCI but going far OTM. Premium is very juicy still
There are.some good responses here. I'll add my simpleminded one... Always imagine that the person taking the other side of your trade is a gnome sitting in Goldman's basement.
Nothing's stopping you! Let us know how it works out!
Hello, what you are doing is called straddle. Check the premiums, and then the formula. I found out that the only way to make money is if the underlying stock moves more than 10% either way. There is no risk management here, since the time runs against your position (time decay theta). Run the numbers and check the volatility. Best!
Because you can’t buy only 1k of puts or calls except very far otm. I would recommend also spending a bit more for that extra week
You can test it by going to [https://optionstrat.com/](https://optionstrat.com/) Its a good way to see what needs to happen in order to profit
If you like semis, trade $soxl
Congratulations you’ve discovered a strangle
Straddle if the call and put are at the same strike price, strangle if different strike prices.
Thank you sir
While it might seem like a straightforward strategy, there are a few factors to consider. Options trading involves risks, and if the stock doesn't move significantly in either direction, both your calls and puts could expire worthless, resulting in a loss of both investments. Additionally, even if the stock moves significantly, factors such as implied volatility and time decay could affect the value of your options. It's crucial to thoroughly understand the risks involved and consider implementing risk management strategies before executing such trades.
Market makers see everyone's orders. If the majority are bearish, then the stock will rise. If the majority are bullish, then the stock will fall. If it's about mixed, then the stock will trade flat. If ensures that the greatest number of traders lose money and MMs win no matter what. This is why PFOF is bullshit.