I'm currently hanging onto your coattails for dear life (and enjoying the ride).
You wrote:
> As usual, we’re pricing these trades using Black-Scholes and the current implied volatility of each leg. Some of these chains are wide or stale, so we’re not going to chase. If we don’t get the prices we want, the trades don’t fill. [...] Unless otherwise indicated, all trades are day orders and will be canceled at the end of the day if they don’t fill.
I was unable to get the NVTS positition to fill, but you *did* get it to fill at $1.65; given that *you* now have this position, isn't there some window of time in which I, too, should "chase" it (up the maximum debit)? I mean, what if I could grab this position tomorrow or the next day, and thereby enhance my grip on your coat?
I’d think of the max debit less as a moral commandment and more like the chef’s recommendation on how to order the steak. You can order it differently, but you’re changing the dish.
With something like NVTS, that matters a lot because the fair value of the trade can move quickly. The stock was up more than 10% during regular trading today, then dropped after hours following earnings. That doesn’t necessarily kill the thesis—the report had some positives, including sequential revenue growth and higher Q2 revenue guidance — but it does mean tomorrow’s option prices may not resemble today’s.
So the answer is: yes, there can be a small window where paying a little more is reasonable, especially if the stock and implied vols haven’t moved much. But after an earnings report and a volatile after-hours reaction, the right question isn’t “What did David pay?” It’s “What is the structure worth now, given the current stock price, implied vols, and post-earnings setup?”
If NVTS still looks attractive tomorrow, you may still make money buying exposure. But you wouldn’t necessarily be entering the same risk/reward trade I entered today.
NVTS has had the post-earnings rerating we were looking for, so I’m entering a GTC limit order to sell the September $18 call at $16. That’s based on pricing the call around a target stock price of roughly $32, using the current ATM straddle as a guide. If NVTS doesn’t keep moving toward that level, I’ll lower the target later as needed.
I'm currently hanging onto your coattails for dear life (and enjoying the ride).
You wrote:
> As usual, we’re pricing these trades using Black-Scholes and the current implied volatility of each leg. Some of these chains are wide or stale, so we’re not going to chase. If we don’t get the prices we want, the trades don’t fill. [...] Unless otherwise indicated, all trades are day orders and will be canceled at the end of the day if they don’t fill.
I was unable to get the NVTS positition to fill, but you *did* get it to fill at $1.65; given that *you* now have this position, isn't there some window of time in which I, too, should "chase" it (up the maximum debit)? I mean, what if I could grab this position tomorrow or the next day, and thereby enhance my grip on your coat?
Thanks—glad you’re enjoying the ride.
I’d think of the max debit less as a moral commandment and more like the chef’s recommendation on how to order the steak. You can order it differently, but you’re changing the dish.
With something like NVTS, that matters a lot because the fair value of the trade can move quickly. The stock was up more than 10% during regular trading today, then dropped after hours following earnings. That doesn’t necessarily kill the thesis—the report had some positives, including sequential revenue growth and higher Q2 revenue guidance — but it does mean tomorrow’s option prices may not resemble today’s.
So the answer is: yes, there can be a small window where paying a little more is reasonable, especially if the stock and implied vols haven’t moved much. But after an earnings report and a volatile after-hours reaction, the right question isn’t “What did David pay?” It’s “What is the structure worth now, given the current stock price, implied vols, and post-earnings setup?”
If NVTS still looks attractive tomorrow, you may still make money buying exposure. But you wouldn’t necessarily be entering the same risk/reward trade I entered today.
NVTS has had the post-earnings rerating we were looking for, so I’m entering a GTC limit order to sell the September $18 call at $16. That’s based on pricing the call around a target stock price of roughly $32, using the current ATM straddle as a guide. If NVTS doesn’t keep moving toward that level, I’ll lower the target later as needed.
With NVTS closing at $29.25 yesterday, I have raised my limit price for my GTC sell order on our $18 strike September call from $16 to $25.
BW and NVTS both up >23% today as I type this.