HeresapreviewofwhatIllbetalkingaboutonOptionsActiontonightat5pmonCNBC。

AsEnismentionedintheNameThatTradepostearliertoday,theOct/Nov41putcalendarthatItradedlastweekaheadofJPMearningshasworkedoutquitewell?

Ratherthantryingtore-inventthewheel,IfiguredIdgowiththesamestructureonanotherfinancialsnamethathashadabigrunhigherintoearnings,andalsohasanoptionstermstructurethatmakescalendarsquiteattractive。

EnisdetailedthelowlevelofNovemberimpliedvolatilityinGSinhispost?

Iveincludedthepostbelow。

Volatility:GSimpliedvoltendstosettleinthemid20sfollowingearnings。

Novembervolisalreadyat27volsowillnotgethittoohard。

IwanttoownNovandfinanceitwiththehighervolinOctober。

Event:GSreportQ3earningsOct16th,Tuesdaypre-open,theoptionsmarketisimplyingabouta3%movevsthe4qtrtrailingavgofabout3。

375%。

Trade?

GS(120。

75)BoughtOct/Nov115putcalendarfor1。

40

sold1Oct115putat0。

52

bought1Nov115putfor1。

92



Break-EvenonOctExpiration:

-Ifstock115orhigher,theOct115PutswillexpireworthlessandandIwillowntheNov115Putsfor1。

40atthatpointIwilllooktospreadthem。

-Ifstockmovesbelow115IwillmakethedifferencebtwntheOctthatIamshortandtheNovputsthatIamlong。

-Mymaxriskisthe1。

40IpaidfortheCalendar

***JustLikelastweek,IputthisoninverysmallsizeasIwillre-evaluatemystrikesonMonday,PriortoGSsearningsTuesdaymorning。

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OriginalPostOct12th,2012at12:21pm?

NameThatTrade:GScalendars,andJPMRecap

LetsstartwitharecapofhowimpliedvolatilityhasmovedtodayafterJPMsearningsreport?

DaninitiatedaOct/Nov41putcalendaronJPMtoselltheimpliedmove,andpotentiallyplayforagrindlower?

Luckilyforhim,todayspriceactioninJPMisclosetoideal,asthestockhasmovedlower,closertotheNov41strike,whiletheOct41strikehasbeenhitbythevolcrush。

WhatsurprisedmewhenlookingathowJPMimpliedvolatilitybehavedthismorningwashowlittleNovemberimpliedvolatilitymoved?

JPMimpliedvolatilityis2pointslowerinNov,onamoveofJPMthatwasbasicallyunchanged?

Tome,thatsastrongsignthattradersarereluctanttosellNovemberoptionsanylower,despitethefactthatJPMtradedinatightrangesinceQE3,between40and42。

5?

ThisisalsoaresultoftradersnotpricinginmuchofamoveforJPMearningsinthefirstplace,soitshardtosellJPMoptionsmuchlower,evenaftertheeventhaspast。

Ivementionedbeforethattheelections,fiscalcliffapproaching,andyear-endsellingcouldinducemacrovolatilitybeforeNovexpiry?

TradersseemtobelatchingontotheideaofowningNovemberexpiry。

Usingthatideaforearningseventsnextweek,IwantedtolookatsimilarcalendarsinGSaheadoftheearningsreportsnextweek。

First,herestheGSfrontmonthoptions:

The120callcalendarand120putcalendararesimilarlypriced(around$1。

80)?

ThereasonitlooksattractivetomeisthatGShasmovedlessthan2%on5ofthelast8earningsreports,butalsobecauseNovemberimpliedvolat27cantgomuchlower?