izzo70 22 Report post Posted June 9, 2016 (edited) Considering that ORCL IM was 5% and the June straddle entry price target was 4.5 - 4.7% or ($1.75-1.80) . We ended up paying approximately 1% more for the July straddle to decrease THETA, right? How did we determine the approximately 1% increase in the July options entry price was fair or good for the ______% decrease in theta. Is , for example , 5 theta point decrease worth 1/2% or 10 theta point decrease worth 1.0% increase in options price?? Is there a formula somewhere to be able to calculate this? If my questions is completely off the mark I apologize. Thanks, Paul Edited June 9, 2016 by izzo70 Share this post Link to post Share on other sites
Kim 8,042 Report post Posted June 9, 2016 July straddle price is in line with June price, considering extra 4 weeks of theta. And the price is reasonable compared to previous cycles. I don't know if this is the lowest we can get, but considering there are only 5 trading days left and the stock is close to the strike, I felt it offers good risk reward. Share this post Link to post Share on other sites
izzo70 22 Report post Posted June 9, 2016 I only ask for educational purposes and not to question the price. Believe me, im pretty new at this and am happy to be a part of this forum. Could we say that an extra week of theta would be worth 1/4% in most cases or just in this case? It also appears that the IV went down by approximately 18% today. Does this weigh good in our favor as we bought when IV was lower? Share this post Link to post Share on other sites
Kim 8,042 Report post Posted June 9, 2016 It will be different for different stocks. For example, for LULU the weekly straddle was 8.5% IM before earnings, but going extra 4 weeks out the straddle was 11%. It depends on IV (higher IV will have bigger difference in price) and other factors. ORCL IV for July was almost unchanged today, but the price became slighly lower due to negative theta which is around $3/day. Of course IV is dynamic and can slightly fluctuate, but overall we entered at reasonable levels, comparable (or slightly lower) with previous cycles Share this post Link to post Share on other sites
Javier 99 Report post Posted June 10, 2016 (edited) Sorry forget. misanderstood question Edited June 10, 2016 by JMACHOSO Misanderstadng Share this post Link to post Share on other sites
izzo70 22 Report post Posted June 10, 2016 (edited) I thought IV was a the same across all strikes regardless of expiration at any given point in time. Historical Volatility however is based on the same time last year and IV Rank (as is known in TOS) is the difference in change from the same time last year. I can see now that IV% changes with the expiration. That is why i thought we got 18% lower IV on this trade because June was at 38% and when we did the trade it was at 22% (or something close to that). I can now see June IV is 41.5% and July is 24.9%. I will have to read more on this to understand why that is. Thanks guys for your help. Edited June 10, 2016 by izzo70 Share this post Link to post Share on other sites
