The most common question I get here,? “Who is that French anchorwoman”. The 2nd most? “Why didn’t my puts move up when the stock opened down 3 points, and are the MM’s rigging the quotes?
Along those lines, Mark from Options for Rookies forwards me this piece he wrote a few years ago in SFO Magazine.
“I don’t understand what happened. Yesterday I bought puts. The company announced disappointing quarterly earnings, the stock dropped from 104 to 100, and I’m losing money. How can this happen? Help!”
This lament from an inexperienced options trader recently was posted on a message board that I frequent. It reaffirms my belief that too many people jump into trading without fully understanding how options work. The purpose of this article is to answer the question raised by the person that posted this frustrated message and to ensure that SFO readers understand that it takes more than just an opinion about which way a stock is going to move before buying options.
Yes yes and yes. Traders need to always remember that option prices have two components.
One is the directional bet, the other is the volatility bet. You can easily win a directional bet, and lose a volatility one, and get slammed.
We all know about earnings bidups, but there are just general bidups and selloffs in volatility too. One day we’re obsessed with every financial going to 0 and options are exploding, the next day, The Worst Is Over and you can’t sell a thing. A few days in, you may have seen the market lift, but volatility get smacked so much that call options actually went down.
It’s important to note that just like stocks, options are auction markets. There is no “set” volatility, it’s the market pricing in Fear and Time. And as that Fear dissipates, traders start worrying about time again, namely time eroding the value of their options in the absence of much movement in the market. And they lower their bids and offers.
OF course it’s possible to mitigate volatility risk, and make pure directional bets. A vertical spread, buying one option and shorting one in the same expiration cycle, but different strike, is an ideal directional play with very little volatility risk. You give up your “windfall” chance, but also take on small risk if you are wrong in every which way. 
u best be careful Adam … that anchor babe may send the gendarmes after you for internet stalking
lol, I’m trying to help her get the CBS anchor job when Katie Couric gets axed.
so your focus has shifted from Erin on cnbc to this French tramp? did you see her top-less photos on the beach on the web? or are you just trying to distract us from options trading?
so your focus has shifted from Becky Quick to this French tramp? did you see her top-less on a French beach photos? or, are you just trying to distract us from options trading?
Oh yeah. Can I vote for her now?
http://www.yousaytoo.com/Anwar/the-worst-most-beautiful-news-reporter/8845
http://wizbangpop.com/viewimage.php?image_url=http://wizbangpop.com/images/2008/01/french_news_babe_melissa_theur/melissa_theuriau01.jpg&image_width=1007&image_height=1179&alt_attribute=melissa_theuriau01.jpg
Even this babe “speaking the news” en francais would be better than that wizened hobbit, Couric.
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jake: not sure that’s fair, not sure she’s actually wizened, lol.
zen: indeed. And thanks for the pics. “Stumbled” on them here and there, but always good to re-appreciate.
buy lo: just a distraction. See, instead of looking at the pic you might have bought some bank stocks, lol.
Buy-lo, Adam’s been on this bitch for some time now, I don’t think it’s a distraction as much as it is a heralded and highly appreciated part time job.
As for the topless photos, and dude worth his balls saw them months ago, probably the first day they were published. You just can;t responsibly let something like that slide.
Danny’s 100% right, this is what the internet and Google were created for, being able to access those pics in 3 seconds.
Google? You don’t have them bookmarked and/or downloaded (saving yourself those 3 seconds)?!
The amazing thing is, that unlike 99.9% of them, the French Babe looks better in screen shot captures than she does in those stiff head shots they do for publicity purposes.
That’s true beauty, as opposed to the manufactured variety (cf. “the wizened hobbit.”
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DPeezy: Not sure I want my son looking for Webkinz and accidentally hitting some desktop icon and ……actually whatever, he’ll learn to use Search soon anyway I’m sure, lol.
Jake: You need to add a warning to links like that, maybe N.S.F.E.S. (Empty Stomach).
One thing you can say about the wizened hobbit…
She’s better than Janice Soprano!
Ovah heah!
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Kids figure that out way before their parents do. True story. ‘Webcrawler’ was such a good friend to me, back in the day.
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I didn’t realize ‘the wizened hobbit’ was still on the Vizzle. People still watch her drivel?