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Why did apple mini calls lost so much although price went higher...?
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Created: by TraderTed Attachments:1

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Why did apple mini calls lost so much although price went higher...?

  #11 (permalink)
Elite Member
Hamburg + Germany
Futures Experience: Intermediate
Platform: Multi Charts, Esignal
Favorite Futures: YM
Posts: 17 since Mar 2010
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whatnext View Post
Futures options value increases with volitity - not stock options; they decrease like FT said.

@whatnext The stock options value do increases with volatility, but the problem here was, that the volatility was high already because of earnings comming. And the calls were high in price because of the high volatility when I bought them.
So I planed my risk reward on the basis of high level vol without realizing that the imp vol would fall out of bed right after earnings and with it the option price.

I did expect a to win between $35 to $48 with a risk of $34 in about 3 days. And if the volatility had remained unchanged it would have worked, because the stock did exactly, what I expected. I probably would have sold the call on fridays highs a bit before my target.

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  #12 (permalink)
Elite Member
Calgary, AB
Futures Experience: Intermediate
Platform: NT, IB, TOS, MC
Broker/Data: IB, Rithmic
Favorite Futures: CL, ES, GC, ZS, ZB
atata's Avatar
Posts: 116 since Mar 2010
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volatility crush...

TraderTed, you have experienced volatility crush... one popular trading method is to sell vol through earning season /mostly using Iron Condors/ on weekly options. Obviously there is more to it but the basic idea is you have to look for a stock which has approx twice as much vol on the current options on the day before earnings reporting than the monthly or next week options. Volatility after earnings will adjust to "normal" circumstances, ie next week or monthly vol. If you still want to buy options than you have to buy deep in the money especially in a high vol environment such as just before earnings. My understanding Tom Sosnoff /you can check out tastytrade.com his new venture/ who was one of the founder of TOS won't buy any options - if he ever does - with less than 90 delta. Also vol is different for each stock so you always have to make sure you compare apple to apple and not stock to another stock.

If TOS is having such restrictions than I think your better choice might be other than TOS Interactive Brokers - IB if you want to trade US markets or any markets actually, however I am not sure if IB would be the same in Germany as in Canada. IB is probably the best broker for Canadians as per commissions, trading flexibility, etc... If you are living outside of the US than trading can be very different experience. From Canada we don't have access to Traders Workstation in every province, TOS charges a "lot" more for commissions than in the US, OptionsXpress /CharlesSchwab/ just closed Cad operations end of last year. Most of the Canadian brokers. ex.: usual drill is 9.95 + 1.25 per options contracts... IB does not seem to differentiate which country you are coming from rather what are your trading. As far as my understanding goes I pay the same via IB as a US citizen trading ex. goog or aapl options. Also all the goodies are available as per credit/debit spreads, calendars, bflys etc... or any kind of custom monster you can think of.

IB US Commissions

Please note that IB is not as "hand holding" as TOS, their system is not as user friendly as TOS /longer learning curve/ however you cn fire a space shuttle from IB TWS platform... also note IB will terminate any position /I believe it is fully automated on their end/ to ensure that they won't have to assume your risk... learned it on the hard way...

Hope this helps,

p.s.: another site you can check out to speed up your training on options is John Carter's simpleroptions.com

wie geht's?

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  #13 (permalink)
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traderwerks View Post
Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

This is the implied volume chart for AAPL

This picture shows it all. After the earnings release implied volatility dropped from 43% to 26%, leaving the out-of-the money calls next to worthless.

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