“Vega/theta” is not a ratio. Sorry for the confusion but I just lump the two together since to me they are the same thing , namely, extrinsic value. Theta is just a “special case” of vega in that it behaves in a lognormal fashion as a function of time. In reality, extrinsic premium is all over the place and thus, from a risk perspective, I treat vega (slash) theta as a single phenomenon.
As I suggested, if you are making an earnings play, you’ll likely get the best reward for risk if you play the month that the earnings happen. I can understand that there may be reasons to not own short term premium – though that way of thinking is pretty alien to me. So if you want to play the big delta movement you expect to occur in rimm, there’s not much more I could suggest; july is as good as sep is as good as dec…
From: OptionClub@yahoogro
Sent: Sunday, May 31, 2009 12:37 PM
To: OptionClub@yahoogro
Subject: re: [TheOptionClub.
I never as a rule not buying long options with less then 45-90 days.
I do need movement and to belive that the stock can gain intrinsic value as the debit that I am paying.
But regarding to Vega/theta what is this ratio tells me?
Nava
From: "karensoich" <mcatolico@mindsprin
Sent: Sunday, May 31, 2009 5:31 AM
To: OptionClub@yahoogro
Subject: [TheOptionClub.
if you are doing this as an earnings play i would suggest you trade the month the earnings come out. if you believe that whatever happens after earnings will start a trend that you want to be in, i would wait until earnings are announced and then pounce on the direction you want to lean the trade with a vertical or other directional strategy.
you ask about the greeks. well the obvious risk is vega/theta. whatever happens after earnings are released, rimm iv will likely fall - particularly in those july or sep options - and thus you have to get enough big directional movement to compensate for the debit on the strangle (especially if you decide to play june expiration, as i suggest, which would expire immediately after earnings). so you have to be prepared to either have your fortune telling skills perfect (i.e. you guess correctly on a big post earnings move) or you have to be an aggressive seller of premium on pre-earnings opportunities or directly into any post earnings move.
--- In OptionClub@yahoogro
>
> Hello all,
>
> I am considering a trade on RIMM b4 earning .
> Rimm has earning June 18.
>
> I thought about on 80/75 Sep cost 16.75$ debit or to go on July same strike cost 11.15$ .
>
> my question:
>
> I don't look at greek so all the greek export here what do you think?
> I want to learn.
>
>
> when I am placing this kind of trade .I am just checking if the stock can move that far to make me profit.
>
> Nava Elgar
>
To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
Change settings via the Web (Yahoo! ID required)
Change settings via email: Switch delivery to Daily Digest | Switch format to Traditional
Visit Your Group | Yahoo! Groups Terms of Use | Unsubscribe
No comments:
Post a Comment