How to avoid IV crush as a retarded earnings gambler via /r/wallstreetbets #stocks #wallstreetbets #investing

How to avoid IV crush as a retarded earnings gambler

As earnings season continues, it is all the more important to ensure that implied volatility doesn’t assfuck all of you. Here’s (kind of) how to do this.

basically, if you buy an option around earnings, the gain in intrinsic value has to exceed the drop in extrinsic value (both the theta decay (because I’m assuming us retards are buying calls or puts expiring the Friday of that earnings week) as well as the drop in implied volatility).

To do this, buy a call or put that you expect will be decently itm after earnings. this means DONT BUY THE FUCKING 50% OTM CALL OPTIONS ON AN EARNINGS REPORT THAT YOU EXPECT WILL MOVE 10%.

example: I bought 25c 2/4 snap calls earlier today before earnings hoping for good news (i received something truly glorious) and now those calls went from 0 intrinsic value to being 14 dollars in the money, giving it 14 dollars worth of intrinsic value.

I paid 2.55 (average) per contract (pure extrinsic value) and even if total extrinsic value declines by 100% (which is impossible until expiration, but expiration is tomorrow so) the contracts are still worth $14.00 in premium.

in conclusion, don’t be retarded like this guy (he bought the $34 call even though he expected the stock to be at $33):

-101.25% daily loss from wallstreetbets

and instead buy contracts that you think are going to be itm at expiration

good luck retards.

Submitted February 04, 2022 at 03:36AM by YakkoWarnerPR
via reddit