9 Comments
 

Don't be surprised if you see a big rebound in this stock next week

"I wanna Thank the Good Lord for Making me a Capitalist"
 

ur missing the point.. what i'm trying to say is that VOL is EXTREMELY expensive! It doesn't matter if you think Goldman will head up or down.... buying puts or calls at this point is ill-advised due to the heavily pumped up premium.

So here are some current bad ideas:

1) buying naked calls 2) buying naked puts 3) buying a combination of puts and calls (straddle/strangle)

 
Best Response

I strongly agree with credderivs, ... you dont want to be putting on any trade that positions you long vega. i.e. its probably not a smart trade to think that the implied vol will rise much further. So if you want to put on a directional play, buying options is NOT the way to go right now.

For those who may not understand completely, I`ll try to give an example.

Say GS is trading at 160 today, and you think that in a months time, it`ll end up between 168 and 170. The dealer tells you that to buy a call with a strike at 170, the option costs $13.50- (meaning you would need GS to end up above 173.50)....

The reason its so expensive is because the implied vol is thru the roof right now (on the above example its 96%), so even if you get the direction right (goldman shoots up), its probably not worth it due to the additional premium dealers are asking for.

 

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