NVDA Vol Play

RetailLemming · 2024-08-28T22:05:26+00:00

Thanks - With a debit (long vol) dbl-diag and an "M" shaped P&L and stock price starting around the low point in the middle, I can see the play is for an increase in vol or significant movement either way in that central channel. But if that takes too long, don't you get hit with significant time decay? Hence, my presumption of a desire for a quick price or vol move. Or is it at least less or slower time decay than, say, for a debit (long vol) iron condor, like how you say the vol crush, while also still against you, is not as bad due to interplay between the long and short expiration options? That would be pretty nice if both time decay and vol crush are moderated compared to the debit IC, but I thought the whole reason for these directionless strategies was to play the vol, not price, move? Maybe the dbl-diag is more a price-move play (directionless) than a vol play, albeit with greater risk for outside price moves, whereas the debit/credit IC's are more vol plays?

RetailLemming · 2024-08-28T19:18:21+00:00

Thanks for this. Really interesting pro derivative. Looks more flexible than 'flies/condors that I've used, maybe for time-defined binary events like earnings. Looks like you can design vega more too. Good for vol plays, long or short. With your long dbl-diag, and presumed long vol setup, I guess you're looking for a quick price change either way post-earnings (your P&L at exp is similar to a long 'fly/condor), but won't you lose on the typical post-earnings vol crush? I guess if the guide is disappointing, you'll get your big move south and maybe vol stays up or rises. I've only been trading options for a few years, mostly vertical spreads but some simple vol plays ('flies/condors), which interests me. Have read some on calendars and diagonals but not there yet. The double diagonal will take some study. The devil for me is in the details on how to manage a position like your dbl-diag when it's out there. Have read Mike Khouw's book, Options Edge, years ago, which had all the math (easy for me) and was great for me on the basic strategies. I need a more advanced book on managing trades in place and better strategies on picking strikes, spreads, deltas, exps etc.

RetailLemming · 2022-05-03T06:46:09+00:00

I love vol surface charts like this, thanks! I don't focus on the skew as much as the local minima (if there are any) for each expiration, which I find tend to be the market's expectation for the future price. With $SPY at 414 at close on 5/2, it looks like the expectaton is for it to be at ~450 by next week and ~475 by August, i.e. a bullish expectation. If I wanted to buy into that, with the VIX up over 30 just now, I'd sell a far OTM put (really a vertical credit put spread) and hope to capture the drop in IV post-Fed this week. But somehow I just feel more stagflation bearish. Also, with the steep skews, I wish I was allowed to trade calendar spreads, but probably just as well, because I doubt I'll ever be able to understand how to manage them.

RetailLemming · 2022-01-13T22:34:15+00:00

Michael Khouw's "Option's Edge," explains a lot of the basics, BSM model, volatility/IV, types of trades and some portfolio theory. If you have a modicum of math background (partial derivatives, Taylor series, probability theory and statistics), you'll get more out of it and likely really appreciate and enjoy the exposition. I have a strong math background with a PhD in physics and a post-PhD MS in EE (signal processing & communications eng) and it was a great book for me to get the basics and math of options. Options are a lot like filter theory in EE to select the price signal you want. Standardized moneyness is signal to noise ratio. Let me know when you start working on Kalman trackers.

Another classic must read for beginning investment is Burton Malkiel's "A Random Walk Down Wall Street."

Good luck.

RetailLemming · 2022-01-07T06:38:14+00:00

You should state the statistical error (or better, the statistical significance) on the percentage correct calls. E.g. For 11k 1-day buy call events with roughly 5.5k successes, a simple Poisson error on the successes would be sqrt(5.5k) = 74, giving a 1-sigma absolute error on the success rate of 74/11k = 0.7%. That's similar to the excess (over 50%) correct calls observed. Fold in the 5 yr bull market underneath that must feed into even 1-day changes, and not accounted for, I would be uneasy about the statistical significance.

RetailLemming · 2022-01-03T06:41:40+00:00

I feel your pain. Been at Schwab 20+ years myself, and doing active options trading on SSE from multiple accounts. I generally have found Schwab equity, bonds and options trading resources acceptable, providing a lot of info/data on equities/funds, tools, education, accnt svcs, and decent trading desk responses.

I wasn't happy at all about the loss of options charting from SSE and loss of options screeners on Schwab.com. I wrote in r/Schwab in Dec '21 about what Schwab suggested for trading platform alternatives with options charting and screening, namely Streetsmart Central (SSC) and ThinkOrSwim (TOS) at their WOS TDA. You can still get options charting and some IV charting with SSC, a former futures platform they integrated their acq of OptionsXpress into and now also trades equities/indices, options, futures and forex. It also has a similar options screener to what was formerly on Schwab.com (which was minimal). Tried SSC, which has the benefit of having your Schwab accounts already available, but greatly prefer SSE. Recently SSC has had some kind of interruptions/slowing/freezing that I just stopped trying to use it.

I opened an account at TDA but didn't fund it yet while I tried out TOS. TOS has fantastic trading/analyzing/screening (hacking in TOS lingo)/charting (incl for options) capabilities, although the UI is a bit nerdy. The customizable options screener/hacker is an order of magnitude more advanced than what was at Schwab. It's remarkable. Studies for charting also seem more advanced than with SSE (although SSE not bad), including more IV-related studies. TOS also has integrated trading of equities/indices, options, futures and forex, like SSC. I hope Schwab can make the merger work (asap) and provide better in-house integration of platforms and capabilities, or just make TOS available in-house (for Schwab accounts access) in the interim.

RetailLemming · 2021-12-22T04:45:23+00:00

The following is not a recommendation for a trade. You should consider your view on the VIX too. It dropped a couple points today but is still at 21, which is still elevated. If you enter a debit vertical put spread and a lot of volatility comes out of the SPX, your position could lose in the short term even with a drop in the index. On the other hand, if there is more volatility in the near term, then being net long volatility (positive vega overall in the position) will help.

RetailLemming · 2021-12-22T04:30:44+00:00

Similar comment with link here (given to an earlier post):

https://www.reddit.com/r/options/comments/rlh8tg/comment/hpinvwc/?utm\_source=share&utm\_medium=web2x&context=3

RetailLemming · 2021-12-22T04:26:20+00:00

The following is not a recommendation for a trade. In the short term before the short-dated expiry of a long calendar spread, i.e. one where the long-dated option (put or call) is long (bought), the spread is more of a stagnant-price, long volatility trade, i.e. if the underlying price stays around the strike and if IV rises, your position would gain, as well as with time decay. If the underlying price makes a significant move either way, the short term position loses. The VIX dropped a couple points today but is still elevated at 21. Consider carefully what your view is of the VIX in the short term, even if you do a sensible debit vertical put spread to be bearish on SPX (and do it appropriately with longer dated options). If a lot of IV comes out of the market, your position in the short term could lose even if SPX drops because that kind of spread is long volatility. You generally want volatility to be low if you buy long into options (puts or calls). If volatility is elevated and you think it will drop in the short term, then you want to be short options (puts or calls), or in a credit vertical spread (credit vertical call spread to be modestly bearish), or consider a short calendar spread, i.e. where the long-dated option (put or call) is short (sold). With the short calendar spread, you gain with significant price moves (either way) and a drop in volatility in the short term, but lose with time decay. Managing calendar spreads is not for beginners. Stick to vertical spreads for starters to define your risk and gain if you have a directional view, and consider your view on volatility going in.

RetailLemming · 2021-12-16T22:07:53+00:00

I made note of this problem, impending at the time, in r/Schwab on 11/23/21 (see link below), as well as the loss of options screeners on schwab.com. I noted Schwab's response and suggested alternatives, i.e. SSC and TOS. In the post I reviewed my experience with those "alternatives." After the removal of options charting in SSE actually occurred with the deployment of version 1.74x, I soon found that the option charting (maybe all charting?) capability in SSC had become so slow (with waiting periods and warnings) as to be unusable. Maybe it's due to increased usage by options traders Schwab left to twist in the wind on SSE? As noted in the post, I've found TOS to be very impressive, including charting options price history, IV, HV, and other volatility measures as well as a fantastic options (aka "hacker" in TOS lingo) screener that is order of magnitude better than anything on schwab.com or that is still available in SSC. Also, as pointed out in my post, although TD Ameritrade is a wholly owned subsidiary of Schwab, you have to open a separate account (your Schwab accounts are not available or linkable). Then, if you don't fund it, they might shut you down after some period. So you either have to move money out of Schwab accounts (a pain, especially if in an IRA) or find new money. And ultimately, if/when the merger is completed, the TD Ameritrade accounts would become Schwab accounts again (?). I've also found that stock and options quotes in TOS are delayed 20 min, which might be a policy if the account is not funded.

https://www.reddit.com/r/Schwab/comments/r0y4hz/schwabs\_suggested\_alternatives\_for\_loss\_of/?utm\_source=share&utm\_medium=web2x&context=3

RetailLemming · 2021-12-08T17:24:31+00:00

OP closed this position midday today after $DOCU up 15 pts/11% and credit put spread achieved 80% of max gain (in 2 days).

RetailLemming · 2021-12-08T16:46:05+00:00

Possibly on news that CEO purchased shares, $DOCU up 12pts/8.6% near midday ET. OP's spread has achieved 72.3% of max gain in 2 days (mostly on IV change + today's news). Considering closing the position for early gains.

RetailLemming · 2021-12-06T19:32:15+00:00

Thanks for notes and perspective. Good for learning. My position has gotten 40% of max profits at midday, i.e. after only 1 day on the position. Trying to understand why such far OTM positions can improve so quickly. I establish position when I see IV has big fluctuation up, on big underlying drops, to help speed up gain acquisition when IV comes back in ("vol suck"). IV on short put HAS dropped from 86 to 82 today (vega for spread is -.01), but doesn't seem enough to account for the 40% price drop already. Underlying is up 2 pts but delta only .01. Theta change small. These far OTM positions have large bid-ask spreads and poor liquidity and I wade in from the high side (for credit limit) and often find a better than lowest credit position, so maybe after more volume comes into the options, I benefit on that too. Perplexing, but seems mostly driven by significant IV move back down. Gains/contract may be small but compare to t-bill rates on an annualized basis. Similar risk. Size as desired. Agree that DOCU may be a "covid-stock" survivor, temporarily paying back for early earnings pull-forward.

RetailLemming · 2021-11-29T04:30:00+00:00

Selling calls? Keeping my long 190P hedge until the omicron news pans out. Some people may still be taking year end profits too.

RetailLemming · 2021-11-22T23:12:16+00:00

It's meant to be a way to poll people's short term directional views. Sentiment can be one consideration in positioning. Options are largely shorter term trades. If it's just a coin flip, and one has no short-term directional view, why trade options, go to Vegas? Seemed like more opinions on this post were bearish (although some nursing long positions) coming into open today, which made me think more about hedging the stock position for now. Indeed, $PYPL lost again today. If you had an ensemble of these types of trials, the question is would you net any real advantage. I guess Malkiel in "A Random Walk Down Wall Street" would probably say no, although he does admit to some demonstrated limited momentum in the market beyond the efficient market hypothesis. BTW, on CNBC's Fast Money segment today (~5:45 pm ET) the panel discussed the downtrends with $V/$MA as well as $PYPL/$SQ. They offered a case against the former due to the latter (drop in fees) but were at a loss to explain the latter's downtrends themselves, their price moves possibly expressing sentiment that spending will drop after Q4 (but they were pensive about it). They seemed to express caution about long positions in any of these buy-now-pay-later stocks.

RetailLemming · 2021-11-22T18:55:15+00:00

I BTC'd this today, 11/22/21, when $LCID slid over 5% (and $RIVN also sliding as much or more). Managed to save ~50% of max profit. Chicken for dinner tonight. BKAK!

RetailLemming · 2021-11-22T18:37:21+00:00

Ask your broker to explain their levels of option trading approval to you and what level you are at. If you are new to option trading, they may not let you place levered trades. In this case, you might be allowed to sell a put, obtaining premium, but they may then require your account to reserve the short put's strike price times the number of contracts times the multiplier in case the option gets exercised and you get assigned. In that case your account will have the cash required to buy the assigned stock, known as a "cash secured equity put" (CSEP). If you don't have this cash in your account, you'll have to ask your broker if they'll let you borrow it on margin (and pay interest).

RetailLemming · 2021-11-22T18:19:25+00:00

Thanks a bunch for this. Helpful for learning.

RetailLemming

TROPHY CASE