Profile picture
, 6 tweets, 2 min read Read on Twitter
Volatility is calculated in a funny way – it is the annualized standard deviation of the daily returns. we measure volatilities over a period of one year (252d), but consider daily moves, so SQRT(252) = 15.9, you have to divide HV or IV by 16 to get daily expected movement.
IV plays big role on premium, must not be ignored. 36% iv goes to 24% when news cool down. So your premium falls by 33% even underlying stays there. It's just news impact is absorb, so movement expected daily is back to normal. In may case, despite directionally right, u lose.
This losses are due to lost value of options if you're buyer. So stock moves 2-3% as u expected but your CE/PE stays there or goes down, so it's IV who makes buyer lose the money first and then Time Value, as u tend to stay in long, after noticing stock moved in your direction.
Next is to understand, how not to lose Theta Value or How can we buy more time at low price? It's combination between expected move and expected time. If stock hits the target value but not in time. You don't make profit or very less profit compared to investment risk & fear.
For e.g. If we're in first half of the month and target looks to be achieved within a week, then slight OTM (2 strike away from. ATM ) option can be bought with strict stoploss on Time Value and underlying movement both. If underlying moves against u and hit Sl, exit option.
If underlying moves towards target but not with time, exit with small profit at time stop. Time stop = how many days I should hold bought options, losing time value (theta). If target doesn't reach by that time, waiting will erode small profit as well. So just exit.
Missing some Tweet in this thread?
You can try to force a refresh.

Like this thread? Get email updates or save it to PDF!

Subscribe to CompuDex
Profile picture

Get real-time email alerts when new unrolls are available from this author!

This content may be removed anytime!

Twitter may remove this content at anytime, convert it as a PDF, save and print for later use!

Try unrolling a thread yourself!

how to unroll video

1) Follow Thread Reader App on Twitter so you can easily mention us!

2) Go to a Twitter thread (series of Tweets by the same owner) and mention us with a keyword "unroll" @threadreaderapp unroll

You can practice here first or read more on our help page!

Follow Us on Twitter!

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just three indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3.00/month or $30.00/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!