What's up assdicks.
The day after every big earnings there's a stream of regards wanking on about how they picked the right direction with an option but were the victims of some mysterious force called IV crush and have been wronged by the market/market makers/bogeyman.
No one did this to you. It wasn't a rigged market. You bought a way OTM option, and it was expensive because there was a reasonable chance that a big earnings report might get the stock there. The earnings report passed, it didn't move that far, and after that there was fuck all chance the stock would get to your ludicrous strike price. Who was supposed to buy that option off you, now that there's 2 days to expiry and you'd need a 10% shift in price to make it profitable at expiry? Are they supposed to pay the same price, or similar, to what they would have paid when there was a huge catalyst coming before the expiry date? No, fuck no, your already remote-chance option is now a fucking pipe dream, so no asshole is going to pay a premium for it.
IV crush is probably a great convenient shorthand for people who understand what an option is, but it has taken on the role amongst the regards of a mythical force that is doing gamblers dirty. This over-technicalisation has become something that people can use to sound knowledgeable while showing their whole ass by admitting their idiocy. Options have two parameters, strike and expiry, and the price is set by what people think the chance of profit is. The Greeks are a way to try and break this down into some constituent parts, they're not the cause of price changes.
What do I hope to achieve from this? I don't know, fuck you. Long live the casino. Buy options that aren't stupid.
P.s. I do not buy options that aren't stupid, but I don't whinge about it (much) afterwards.
IV didn't crush you
byu/Embarrassed_Dot6628 inwallstreetbets
Posted by Embarrassed_Dot6628
21 Comments
You literally described IV crush and then said IV didn’t crush you, by calling a donkey a horse you aren’t changing the fact it’s a donkey
Also there’s no point addressing the perpetual victims because regardless of the outcome they will find a way to feel sorry for themselves
Dam bro all the writing and u still broke
You lost money?
Yeap, well explained.. i saw posts about NVDA are we buying? Lets go! So i know about IV crush and i was curious to see how bad it would be if the stock did not move. Well i took a screenshot on OTM options for 2 weeks expiration and long story short: anybody who bought those contracts lost half of their money the next morning.. sad but it will open your eyes. I do not play earnings unless i dont mind losing 100-200 bucks just like at the casino
> Are they supposed to pay the same price, or similar, to what they would have paid when there was a huge catalyst coming before the expiry date? No, fuck no, your already remote-chance option is now a fucking pipe dream, so no asshole is going to pay a premium for it.
congratulations, you just described IV crush
“The car falling from the sky didn’t crush you. You standing under a falling car hoping that Superman would swoop in and save you crushed you”.
Ok dickclown
Hello fellow assdick. Thanks for this wonderfully civil and constructive read
So you were crushed by IV?
Most people don’t understand what IV is, which is the crux of the issue. IV is nothing more or less than what a formula spits out to you after it has considered all the known variables that could explain the price of an option (known variables being things like: price of stock, the strike price of the option, date to expiry etc..). Whatever that formula can’t attribute to the observable variables in order to explain the current price of the option, the formulas attributes that “unknown” factor to “Implied Volatility”.
So basically, to make it very simple, it is saying to you, “Look, here are all the known variables, and based on these known variables, the price of this option should be ‘X’, but since the price of the option in the market is NOT ‘X’, it is in fact ‘Y’, there is some unknown factor in play which is affecting the price of this option, and I will call this unknown factor as ‘Implied Volatility'”
There is a reason it is called IMPLIED, and not OBSERVABLE or ACTUAL. It is implied from what? From the current price of the option. It is a fake number that doesn’t exist in reality. It is given to you so you can judge that this option is trading richly or cheaply than what it is supposed to be trading at, that’s all (and to do that, looking at it by itself is useless; you need to compare it to the normal IV level the underlying is usually trading at).
9 out of 10 people talking about iv crush don’t know what it is and just want to sound smart on reddit.
A lot of words to say you suck at options
> Options have two parameters, strike and expiry
No… no they don’t
Wtf did I just not read?
It’s dickass not assdick regard
Theta gang checking in…what’s 4 d chess is to sell options, collect the premium and then use most of that premium to BUY options using somebody else’s money..lol 😉
You’ve just described what an IV crush is
IV is high because of a volatility event. Once the event passes your contract will lose value. How much depends on how itm you are after the event. Further otm, more value lost. In a sense, implied volatility is maximum expected move. Things outside of that expected move are going to be worth pennies. And a move greater than expected will skyrocket that price.
So if you’re trying to avoid IV crush, offset your long options with short ones. Or buy some intrinsic value. Or don’t buy options at all. Selling options into earnings is another path you can take.
Whinge? Gotta be an Aussie.
“IV didn’t crush you Implied Volatility did”
Wait so what’s an option again?