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If anyone actually is interested in a trade here... The option market was pricing in about a 12% move. Today we got a 15% down-move. This means that anyone who
by steveplace 14y ago
If anyone actually is interested in a trade here...
The option market was pricing in about a 12% move. Today we got a 15% down-move. This means that anyone who was short puts either has to cover or they have to sell stock to reduce risk.
Normally what happens after earnings events is that the implied volatility gets crushed as the event risk goes away. However because the options market is feeling a bit of a squeeze, the IV remains elevated... this was the case this morning, but less so right now.
So the trade? If you want to buy the dip, I would look at cash-secured put sales. Specifically the Sep 21 put sale for about $1 or higher.
If fb heads under 21 bucks then you will be assigned with a basis in the 20s. From there you can roll to covered calls or just hold onto the stock at these levels.
Put sales make sense if you are bullish stock and bearish volatility, and as IV continues to fall as the event risk goes away, your position will be in an advantage.
- tatsuke95 14y agoNo offense, but most of us here probably have no idea what you're talking about. I appreciate you taking the time to offer advice, I only wish I could follow it.
- deleted 14y ago[deleted]
- steveplace 14y agoHey no worries. This is my kind of "hacking" so I thought I'd put it out there.
- achal 14y agoI'm actually rather interested in what many of those fancy words mean. I'll end up searching around, but beyond that, are there any decent resources you would recommend for someone with only a basic understanding of the market?
- deleted 14y ago[deleted]
- veyron 14y agoTerrible play. The only reason prices held up is because of the illustrious stock circuit breaker precluding shorting today. To buy the dip, put on a "covered call" position by buying the stock and serially selling weekly calls at a higher price (for example, sell the august 3 calls at 25 strike for 30 cents). Continue to sell weekly calls and collect vol until it reaches your target. The advantage here is that most brokerage firms will let you do this type of trade without requiring extra margin abilities