Why don't I recommend you buy single-leg options, starting with NVDA and VFS
$NVIDIA(NVDA.US$ NVDA's trend over the past few days has had ups and downs. Not to mention the sharp rise before and after the financial report, depending on the recent few days, when IV hasn't changed much, the price fluctuation from 470-495 is commonplace. Although in comparison, 470 to 495 has only risen 5.3%, yet the price change of an option can reach 100%-300%.
However, there are a number of issues to consider when buying call options:
1. The value of time. If you think NVDA will reach 500 within half a month, then buy its 500 20230915 call option, but if you guess wrong, even if NVDA is trading sideways at 495, this option will lose an average of 85 yuan a day, and eventually become a piece of waste paper. And if you finally reach 500 or more, part of your profit will still be affected by the reduction in time value.
2. Expanding volatility. Take today's trend as an example. The image of NVDA is roughly a parabola opening downward, 484-499-492. If you buy a large number of call options at 495, wait 500 at 499 and sell without stopping loss, then your loss is today's time value plus the decline that has been increased tens of times. If you wake up tomorrow, you can see a loss of 20%-30% for each option.
3. The profit to loss ratio is not good. You might say that the maximum loss of buying an option is limited, and the maximum gain is unlimited. However, in reality, it is not very common to run into large losses when selling options, and it is common for people to lose big losses every time they buy options. Plus, options are usually a buyers' market, and prices are soaring, making them even less friendly to option buyers. Just as there are only a few people who can seize soaring stocks, there are also very few people who can make a profit by buying options for a long time.
VFS $VinFast Auto(VFS.US$ It was a skyrocketing stock. It took 10 days, and the price changed 9-91-42. Does it also look similar to the characteristics of today's NVDA options trend? In fact, if you don't like small-cap stocks, want to avoid excessive volatility, and want your account to rise steadily, then you should also stay away from buying single-legged options. If you have a good risk tolerance, and are very confident in your own judgment, and want to increase leverage to increase profits, I would still recommend that you open an option combination, such as the easiest bull spread call, which can greatly reduce the loss of time value.
Also, if you think about when you buy an option, the person who sold you this option is probably a market maker. There may be occasional gamblers who are lucky enough to make a fortune, but don't forget that opening a casino is always profitable.
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魔群月光 : Options have to match mathematical models; the average person really can't figure it out.
TridentRodentOP 魔群月光: A simple backtest is enough to explain the problem.
魔群月光 TridentRodentOP: To calculate the relationship between volatility and option prices, if the volatility is more expensive than the price, there is an opportunity
TridentRodentOP : The general approach is to compare implied volatility with historical volatility, but the market is changing rapidly. Former AMZN, now TSLA. It's important for retail investors to understand that some simple backtesting is paramount