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Looking at all the excitement here, I might conclude that volatility is going to rise, whatever the result of the announcement will be. In this case, I would go long volatility. Here are some alternatives:
- a long straddle (long calls and puts)
- a long delta-neutral straddle
- a short butterfly
The long straddle has the simplest structure. If volatility rises it will be profitable. However, volatility is already high.
Looking at the chart, expectations may drive price up again prior to the event and then there could be some professional selling into strength.
Chances are a move is priced into the volotility of the underlying instrument. Keep an eye on delta and theta those are the tings that will make and lose money for you. And as a side not 2-5 dollars is not a cheap options. I am sure out of the money calls may go as low at .05 pending strike price. The problem with priced in Implied Volotility is that the prices are inflated. so when a non even occurs you lose your premium faster than a sailor on shore leave.
No... You didn't misunderstand. I was willing to enter this trade blind, but now I'm not so sure.
I have been educating myself all day... I'll check out the link.
I have a question about risk. When the strike price is reached on my long call what happens if the trade goes sharply
against me. Do I need stop losses like my futures trading? I'm I responsible for the underlying equity?