Update on DELL straddle--
As expected, the straddle remained unchanged throughout today as the market waited for news after the market closed. Turns out the news was great and Dell has risen 9.72% in after-hours trading. I stumbled across a news article that mentioned that historically, the after-hours move of Dell in response to Earnings Announcements will carry over in to the following trading day with a strong continuation. While I expect the 9.72% move to offset the certain drop in IV tomorrow morning; I'm also hoping for some additional moves up.
Cheers.
2 comments:
Have fun watching the finale of Lost...
mom
After placing the orders for Dell 22 Straddles, I think I am understanding why the addobe straddles looked better at a farther-out expiration. Because we were unconcerned with the movement of the underlying, I did not give any consideration to breakeven points--I didn't care where the stock was, I just wanted IV to increase so I could sell back both the Puts and the Calls for a higher price than I had purchased. If you remember, I noted that one drawback to putting on the farther-out straddle was the cost of the position was significantly greater. This means that if we weren't focused on an IV rush, and instead looking for big movement in the underlying stock, the stock would have to move that much farther for the straddle to become positive (it has to overcome the significant cost of initiating the straddle).
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