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In refernece to one of my prior articles, another RT was kind enough to
send me a correction. I've left the correction unattributed because it
was sent as a direct email and not generally posted, probably out of
considereation for me. So...
What caused me to make this remark about volatility was that I usually do
trade it but in this case I wasn't.
In fact, after Friday's close my thought was to wait 1-3 days if a
congestion develops before recovering the 118's so I could wait for the
volatility to calm down after Friday's move. Sure glad I made the mistake
on paper and not for real!
Phil
My old article clipped...
> >Two days ago I sold the DEC 118 calls near their highs of the day at 1'23.
> >Yesterday I had to withstand the heat for a day which was not fun, as the
> >calls got punched up to 1'36 and slightly more today at the open. They closed
> >today at '46. I'll get two more days of theta decay over the weekend, plus
> >a lowering of volatility (options traders, don't you just love that sucking
> >sound of volatility imploding when you're short premium?) and it should be
> >time to think about protecting profits or just getting out.
> >
> >
The correction...
> Congratulations on your good trade, but I think you're wrong in expecting
> volatility to DROP after a huge move in the bonds. Implied volatility was
> already extremely low to begin with, and a move like this will generally
> "spook" the market, so option premiums tend to INCREASE because of implied
> volatility increases. You were on the right side of the market, so you'll
> make money anyway, but it's becuase you were right on price direction, not
> implied volatility direction.
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