Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Option Spreads, Credit my Debit -- Ignore unavailable to you. Want to Upgrade?

To: mozoneman who wrote (1902)	1/14/2001 9:41:59 PM
From: KFE	Respond to of 2317

Regulation FD -Impact on IV and Option Prices Since the passage of Feg FD(Fair Disclosure) the uncertainty surrounding earnings announcements has created a greater rise in IV leading into the announcement than existed before. Here is a project for those with decent computer skills(I am not in this group) that can yield information to construct high probability option strategies. 1. find actively traded stocks that have options and are due to release earnings in about three weeks. 2. track the IV on the ATM strike and the strikes one and two strikes OTM. Listing the IV at one week, two days and one day prior to announcement, along with the IV just after the announcement should be enough to show any available opportunities. 3. at a minimum track the front month, subsequent month, and a back month. One of the things that you are looking for is the relationship between the vertical and horizontal skews and the overall rise in IV leading up to the announcement and collapse of IV after the announcement. For example, is the amount of horizontal skew (calendar spreads) greater than the drop in IV (long option for calendar spreads) after the announcement is made. Caution Because of Reg FD and the resultant IV spike it has made speculating on earnings plays with option purchases even more risky. The collapse in IV after the announcement will be even greater than experienced previously and the directional movement of the underlying will have to be that much greater to overcome the IV collapse. You could have a significant anticipated move in the underlying and still lose money in the option purchased. Also, unless I knew the relationship between the skew and post-earnings IV collapse I would exit any calendar spreads prior to the announcement. If anyone taking on this project would be kind enough to share the data with the thread I am sure that it would be valuable and appreciated. I will compute this information manually for a small basket of stocks and will post any possible trading strategies that result. This confirms why I am looking for good personalized option scanning tools. Regards, Ken