So my calls went from $8 to $3 overnight. NVDA obviously went down but i wasnt expecting 60% of my value to go with it. It looks like the culprit is IV. It went from 100+ yesterday to 50ish today. Can someone explain how that happens when a stock crashes from 126 to 116 on earnings after hours and then comes back to 123 in pre market ? Isnt that a ton of volatility ?
Posted by pollitosBlandos
9 Comments
My same calls got fried
The pre-earnings IV was priced in by the market maker.
Now that there’s no longer any major events volatility in the future until the next earnings, market maker will price down options.
IV crush.
If you bought a contract when IV was high, you overpaid, and the market maker took your money.
To my knowledge, IV is primarily used for incorporating uncertainty into option prices so they can differ substantially from HV. So in the case of an earnings release, IVs may be radically different from HV when there is likely to be a huge impact to the price once released. But once earnings are released the IVs will usually revert back towards being closer to historical values.
An options buyer could explain this better than I can, but IV crush is what happened
The market was pricing in a 10% move so short dated calls (and even certain puts) are losers this morning because of the inside move.
Oof the old IV crush claims another victim.
IV was high because of the earnings.
Now the results are known. No foreseen big catalysts pricing the options market up.
Keep in mind, speculators are a fair part of the market but not all. Some are hedging positions, selling spreads to bet against movement, etc.
This is why the huge option gains you see are when *no* event is priced in, and unexpected news flings the price around *and* raises vol. Like gme, gme millionaires happened because everyone was unsure of wtf was happening, so it rose so fast that IV rose with it. Very unusual for stocks to do so (happens in commodities)
I sold well OTM puts. Bought to close this morning and raked in money. IV was 200% when I got into the contracts.
the wild thing is that everyone was talking about how bad IV crush would be on short dated NVDA options. this is a lesson, an expensive one.
I had 10 NVDA240920C118 options that I sold at $15.68 for a gain of $3,700 (31%) on Tuesday. Those options are half that value this morning trading around $8.00. If I hadn’t gotten out, my loss would be $4,000 today.