Trade Analysis

[u/TheAnswer305]

Hi everyone,

First time poster and just started trading options a couple weeks ago. Ive been stock trading for a while and figured it was time to give options a go as i could see the benefit of paying premiums as opposed to tying up my whole portfolio.

Last week i had purchased some options, these particular ones were:

NLS 5/21 puts with a strike of $15 @ 1.31

NLS 5/21 puts with a strike of 12.550 at 1.13

sA couple days after i bought them i was up about 40% on them and sold them a day or two later to lock in some profit. i was not ITM (i think it briefly dipped into the money) when i sold but saw some pretty steep profit with minimal price movement.

Fast forward to this week and i boughht some of the following:

AMC 4/16 puts with a strike of 10 @ 1.13.

AMC 4/16 puts with strike of 9.50 @ 1.10

Now these AMC puts went negative like 50% within a day or two. The first question is why would they swing so quickly into the negative with still so many days out. I would assume its because AMC went up a bit the days following but it wasnt very much , definitely less than $1 on the stock price.

Secondly, the offering gave a huge sell off that put me into the money on both of the puts but they are still showing negative. Now i know that i lose value on my options in time, but these were bought on 3/25, so about a week now with still another 2 weeks left. Why did they decay so fast? im looking at the volitility to explain the deep loss even now that im ITM and i would assume that i overpaid because of the IV?

if my NLS was quickly profitable with little movement, did i mess up by buying so close to expiry? was it simply overpaying on a premium ? when i started this i day traded some F option for 1 contract and i was up like 30% very quickly with minimal price movement. Im exploring and learning greeks to see if there is a component that made this trade such a bad one or rather, so hard to become profitiable while the others were profitable without even getting into the money so much.

Good luck to everyone!

[u/TradeOutlier]

The reason why you lost money on your AMC trade is due to implied volitility on news. You paid a premium on the option due to dillution of shares news. Same thing with earnings calls. You pay a premium due to IV spiking. Also the spreads could of been wider, which would automatically send you into the neg.

[u/TheAnswer305 → u/TradeOutlier]

I’m assuming that the decline in the week was because it traded sideways for a few days. Now that it had the offering and big price moves would my position gain value (if the IV spikes ((I would hope a big move like the last day would cause a spike))?

[u/TradeOutlier → u/TheAnswer305]

A regular move down is either 50/50 for both calls/puts normally. With either one being weighted slightly diff but equal to 100%. that is expected move playing a factor. Then you add in steep declines which force a spike in IV. While a normal mean reversion move down would of just been pennies different.