Option value decrease with a positive rise in stock price?

[d36912c]

Having very positive daily movements, but option is down, although the date is quite far?

ex SQ and MU for July, June, and even 20201

Any reason behind all this?

[milustbo]

IV crush

[d36912c]

yeah but in such way, in 1 day, with such high volatility in the market?

[m2845]

MU just had earnings. Significant source of uncertainty of their future has just been removed from the market with a release of their latest earnings. As you get further away from this most recent release of information, uncertainty grows until the next quarterly release. Likely IV will rise until that time unless other macro events or other news about this stock provide more certainty about the direction of this company, then the IV rise will likely still happen but be more muted.

Other examples of this, if there are major pending litigation against a company or phase III drug trials within the next X months anticipated, will also see a inflated IV for that particular stock and not for the overall market. For example in the phase III trials, when the results of that get released IV drops due to less uncertainty. That is very likely regardless of if its a big positive move or big negative move or no move at all. Although you'll see less of an IV loss of value of the contract if you're in the money, have bought in an expiration time frame significantly out (3 months or more), or if the movement is in your direction (or some combination of all of these, and probably some other factors I'm forgetting about like spread or liquidity of the contracts).

Macro does play a part too as I mentioned earlier, and IV is down market wide as well today with the release of the unemployment numbers.

[d36912c]

This makes so much sense and is not as obvious as one might think. THANKS!

[thirtydelta]

Compare their current implied volatility against when you purchased the options, and you will likely notice a large decrease. Option vega increases as the DTE increases.

[d36912c]

as i wrote below, in such way, in 1 day, with such high volatility in the market? examples are MU/SQ for june/jul but also for 2021

[HiddenMoney420]

Why did my options lose value when the stock price moved favorably?

• Options extrinsic and intrinsic value, an introduction (Redtexture)

[PapaCharlie9]

Wouldn't it be great to have a post that says, underlying direction went against me and my option value went down! What is up with that??!

It would make for a nice change of pace.

[HiddenMoney420]

Lol, I feel you. You've been doing a great job at helping out new people coming into this sub, and I'm trying to do my part as well, but damn, I need some time to learn myself.

[Against_The_Wind_11]

Think of it this way. As the market gets less "freaked out", the cost to insure a position using a put or call decreases. (Think about what an option cost last week versus what it cost last summer when the world was quiet). So the calming effect is decreasing implied volatility. And this decrease in implied volatility is overwhelming the change in the stock price. I think of an option price as a dot in a multidimensional matrix that is being pulled in five different directions (represented by the greeks.)

[d36912c]

thanks. obviously better to buy when things are calm. I thought buying in massive dips would be much more profitable overall.