AAPL - Earnings this Monday - Buy OTM QQQ weekly calls on Monday

Discussion in 'Options' started by FXforex, Oct 27, 2013.

  1. That was the advantage you had with QQQ-- you have more time.

    So you are not playing the alpha of appl but the effect of alpha change of appl on the deltas of QQQ calls.
     
    #21     Oct 28, 2013
  2. Why you did not sell Jan instead? A hypothetical for tomorrow as a comparison.
     
    #22     Oct 28, 2013
  3. sle

    sle

    Please, do elaborate...

    At different times during the day, the market was predicting earnings move from 7% to 8.5%.
     
    #23     Oct 28, 2013
  4. cmb

    cmb Guest

    well apple closed AH at 523.5........better hope for a volitile pre market, all of those option holders are gonna get smoked from what it looks like tonight
     
    #24     Oct 28, 2013
  5. a bit of dh might have saved you
     
    #25     Oct 28, 2013
  6. FXforex

    FXforex


    "Implied 1 day move in QQQ is 1.7%" must be a typo, even for the rest of the week it's high. My 83.50 calls would be worth $0.83.

    $82.92 + 1.7% = $84.33
     
    #26     Oct 28, 2013
  7. AAPL will hit 560s within a short amount of time, relatively speaking, , buy the dips.
     
    #27     Oct 28, 2013
  8. Tomorrow early AM dip, then rip higher, the market wont reverse IMO until Wednesdays FOMC minutes, marking a DCH, we correct for a week or 2, then march higher towards 1800.
     
    #28     Oct 28, 2013
  9. sle

    sle

    Break-even of an option is not the same thing as implied move for a single day which you are going to delta hedge.

    Let's say the weekly straddle is priced at 1.75% - since a straddle price is approximately 0.8 * volatility * sqrt(T), the average implied volatility is 0.0175/(0.8*sqrt(5/252)) = 15.5%. This "average" is a combination of 1 large event move and the regular volatility, which you can impute from longer-dated options (it's like 11% annualized). So, average_vol^2 = ((T-1)*regular_vol^2 + event_vol^2); rearranging it you can solve for the event vol, sqrt(((5/252)*.155^2 - (4/252)*.12^2)) = 1.57%.

    You 83.5 calls should be worth very little even with the implied move, as an estimate, (0.16 * 0.4 * sqrt(4/252)) - log(83.50/82.92) * 0.5 = 0.0045, .45% * 82.92 = 0.35 cents.

    PS. I am at the park walking the dogs, so calculations are a bit on the rough side, but should be ok.

    PPS. the right way to calculate the implied move is to solve a system of two equations from two implied vols, but the rough calc above is good enough
     
    #29     Oct 29, 2013
  10. u guys are just rolling a magic 8 ball at best, so all these calcs are just eyewash.

    at least you've accomplished something useful. (dog pooped)
     
    #30     Oct 29, 2013