For some context I’m quite new to options and have been experimenting with some covered calls on a paper account.
I’ve been aiming for around a 10-15% profit yearly from premiums alone which has been going well, however I had a look at NVIDIA in the early hours of this morning to see some great premiums on calls I deemed to be relatively safe.
I bought 400 shares at 119 (again paper account), selling calls for 131, 137, 141, and 144, gaining me £445, £345, £167, and £174 respectively, all expiring the next day (30th August).
I wanted to see which of these would execute and which I would keep, just to experiment, however after looking again today at premiums for NVDA for a 1 or 8DTE, they’re massively smaller, at around 1/9th of the gain I would have netted early this morning.
I’m well aware that the premiums I got are huge, and I assumed this was due to NVDAs high volatility, however I’m struggling to understand how the potential premiums can fluctuate so massively, and how I would be able to find similarly massive premium opportunities in the future.
Excuse me if my terminology isn’t all quite right, as I’ve only started a few weeks ago, so any help would be amazing!
Thanks in advance guys 🙂
The range of NVDA premiums has shocked me over the last 12 hours.
byu/Oingus_Boingus_ inoptions
Posted by Oingus_Boingus_
8 Comments
NVDA earnings report was yesterday
Pre-earnings IV priced in by the market maker.
After earnings, there is no longer any future event with volatility until the next earnings.
So the market maker prices down the options. IV crush.
IV crush
IV crush. Just to give you an example, 15 minutes before closing I sold a put for 1.15, this morning it was worth .02 and the stock went down in price.
IV went from 230% to 100%
Its big. You gonna get riatch laka biatch
Implied volatility is the answer to your question. NVDA having earnings release yesterday afternoon, increased the probability of volatile movements in the stock price and those premiums were reflected in the option prices. Once the earnings for that quarter had become a known factor and the reaction to the release became a known the unknown probability was removed and the option returned to it’s normal implied volatility. It’s called “IV crush”.
There’s a ton of attention on NVDA earnings right now.
Did bro had a company chart up and didn’t even look if they had a huge event recently or not??