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If you’ve traded Netflix,Altera or Intel stock or their respective options lately, you’ll want to checkout this timely media commentary by TradeKing “Options Guy” Brian Overby.
It’s too late this time to makea profitable bet on Netflix earnings – their latest release happened lastWednesday, Tax Day. But Brian’s comments will likely help shed some light onseveral useful topics for future trading. If you’ve ever wondered what a“straddle” is, or why options often decline rapidly after earnings – aphenomenon known as “volatility crunch” - this Wall Street Journalarticle OptionsTraders Bet on Big Swing from Netflix by Saumya Vaishampayan quotingBrian will help you understand why. Brian has posted several other good readson these topics, if you’d like to learn more:
Meanwhile, if you’ve everwondered what “implied volatility” (“IV”) means, you can see its effects inaction now in Altera ($ALTR) options. Rumors of the firm’s acquisition by Intel($INTC) may be temporarily squelched, but clearly investors think the dealstill might happen. In Alteradeal story far from over, options data suggest,Reuters reporter Saqib Iqbal Ahmed asks Brian to explain the concept and howelevated IV might relate to both the merger rumors and Altera earnings. Brianhas blogged a lot about IV, so if you’d like to learn more on the topic, we’vegot both articles and videos to help:
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Keep trading andlearning, folks!
CEO, TradeKing Group
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[Images: Netflix, Intel, and Altera provided by company sites]
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Multiple legoptions strategies involve additional risks and multiple commissions, and may result in complex tax treatments. Pleaseconsult a tax professional prior to implementing these strategies.
While implied volatility represents theconsensus of the marketplace, as to the future level of stock price volatilityor probability of reaching a specific price point, there is no guarantee thatthis forecast will be correct.
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