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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe)
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To: RoseCampion who wrote (2006)10/27/2000 1:48:13 PM
From: KFE   of 2241
 
Rose,

in your (delta?) neutral spread you wanted IV to rise so you could close at a profit. In this case, of course, it was exactly the opposite effect - the collapse in IV completely overwhelmed the large upside movement in the underlying.

The point I tried to make was that the position would be exited the day before the announcement. I suspect that if you went back 2-3 weeks before the announcement you would see a rise in the IV as the earnings date approached. Only works if there is significant uncertainty regarding the pending announcement.

Regards,

Ken
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