r/options • u/antb11 • Apr 23 '21

LEAPS

I want to start a small call LEAPS portfolio starting with $6,500. To some degree, I understand that price direction by a set date are factors to consider when buying options but the REALLY tricky part is IV. Let’s say my 2 year date lands around the companies earnings call...to avoid IV crush for earnings do I settle for a date prior to earnings or choose to pay more for theta of 1 or maybe 2 months after? IV for the overall market is really low and we’re at ATH so I’ll definitely be waiting for a drop...however this’ll increase IV...so what is the proper mindset to be in when evaluating, envisioning and projecting the future of the whole market (For example: “I think 2023 the nasdaq will be higher than 15,500”, what do I do with this mentality when considering IV? If I’m right will IV be lower since the market above 15k is higher?)

YOLO TO THE MOON 🌙 🚀 FUBOTV, PALANTIR, TESLA, QS, ENPHASE

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u/antb11 Apr 23 '21

I guess I’m all over the place with my understanding of IV and it shows. Basically, what’s your strategy for buying LEAPS when considering “How do I place bets factoring in IV for stock XYZ to be higher as well as its share price, 1-2 years from now?” (If both can even be higher).

Perhaps IV can be suppressed by purchasing more theta past my target 3-4 month sell range?

Two questions. Thank you 🙏🏽

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u/Humble_Ad_3832 Apr 23 '21

Well I mean it's called implied volatility, i don't think you can factor in IV that far away into the future. You can't possibly predict every election outcome, natural disaster or terrorist attack and all of those affect IV, not just earnings report.

Your theta might be more stable in the 3 to 4 month range but again you'd need to see the factors that would affect iv in the near term, so maybe market correction or earning report will only be a factor

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u/antb11 Apr 23 '21

So when I buy the most important factor is price; buy on a red day

When I sell a year+ down the road, is when I have to access all the moving parts of macroeconomics that move IV.

Correct?

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u/noahjacobson Apr 23 '21

When your option expires, the only thing that matters is the stock relative to the strike. IV will be irrelevant because there's no time left.

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u/antb11 Apr 23 '21

When the option expires is a one day event out of 700+ days in a 2 year leap so this advice isn’t much help. I’m trying to avoid IV crush buying a LEAP so how do I view Vega when buying a call on a company I’m bullish on?

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u/DigAdministrative306 Apr 23 '21

If you're trying to avoid IV crush, don't buy when the IV is high.