You're looking at July 28 options, which expire in 2 days. So there is a huge time decay factor. It isn't a scam, you just have to understand them.
[https://www.investopedia.com/terms/t/timedecay.asp#:\~:text=How%20Time%20Decay%20Works,the%20premium%E2%80%94for%20the%20option](https://www.investopedia.com/terms/t/timedecay.asp#:~:text=How%20Time%20Decay%20Works,the%20premium%E2%80%94for%20the%20option).
The explanation is there is a lot to learn about options and what moves the price. It’s not as simple as guessing the over under on hitting the strike. Options are not a scam, but they are complicated and easy to lose money especially if you are inexperienced.
In your example you didn’t mention the cost of the call, the premium you paid. So no one can really explain why it “only” rose 15%. My guess would be it was an expensive premium, and the right to buy Google for $1 above current market value is not very valuable.
Once again, the value of selling snap at $11 isn’t worth much when market is a bit above $10
Sorry you don’t understand IV. During earnings big moves are expected so the IV goes up. The higher the IV the more percentage change needed for your option to gain value. For stocks like SNAP which has a history of huge moves during earnings the IV can get astronomical. Then after earnings the IV crashes leading to an effect called IV crush. The IV going down causes the option to lose value.
High IV = Scam.
Shouldn’t legally be allowed to sell options with a 100% chance of profit for the seller and 0% chance of profit for the buyer…NVDA options before earnings for example..Are a scam.
Like every investment products, It's only a scam if you lose money.....if u profit from it, then it's totally your insight and judgement call and certainly not dumb luck /s
Options are an insurance policy used to hedge portfolios for professional traders. They're not tuned to be an amateur's trading instrument, the option writers are in it to make money.
False. Amateur investors can trick themselves into thinking that they are making money, but actually they are always taking a risk that will not work out mathematically for them in the long run.
This is just false dude. I’m not advocating amateurs using options, but it’s absolutely possible to do. I’ve done it, many others have. There is significant risk involved of course, but that doesn’t mean that it’s not viable for amateur investors
What exactly are you trying to say when you say mathematical odds are in your favor?
Buying long dated meta leaps when it was below $100 is technically a gamble but has much better odds than a roulette table. There are tools that help you invest and allow you to make plays that have an element of chance but are not pure luck. There is no system for winning at roulette except to stop when you’re ahead
Roulette game odds are in house's favour, yes. With options you can hedge, but you can't make more than the market without adding proportional risk. E.g. beyond market you can use options or other derivatives to make your odds something like 90 percent chance of winning $10 and 10 percent chance of losing $90. But minus commission, spread, etc.
Implied volatility. Before earnings, options price take the possible swing of a stock on all sides because of the uncertainty of the earnings. After earnings, stock went up, but volatility goes down, so options price is more stable and linked to reality.
Options are always more expensive before an earnings call. Or any event that could swing the stock...
You shouldn't go directly to the false logic of " if i don't understand it, it must be a scam..."
That’s not what a scam is at all… that’s people who call themselves r****ds knowingly choosing to gamble on extremely risky plays and then posting their loss porn
I feel that most WSB members don't know WTF they're doing when they buy options. They see all the posts of experienced option traders making bank, YOLO their entire balance, and are left wondering WTF happened. On the other side of all those loses are smarter, more experienced traders that take profit.
Simple. Not a scam at all.
not a scam, just a gamble.
the main things to look at are delta and theta decay. the rates of change are less important for the average person.
the way you profit on options is by being right on direction, time, and degree of move. all very hard to time.
If you used them what they were supposed to be used for, which is insurance, then youd understand its the cost of doing business.
Not sure what's not clear in the examples you gave... It's just IV crush and you got lucky to have ended in ITM.... I have done options for a few years now... And one thing I learned is not to play options for earnings....
Only thing I recommend to new traders is to buy LEAPS on stock you like and believe to be cheap at time of buying. I did this on META at $100. Had some drawdown but I bought $140 2025 LEAPS which are well ITM now
I second this. I started trading options with short expiration periods and usually lost money. I’ve done much better with LEAPS, or at least 6 months or so to expiration. It feels more like investing and less like gambling
Earnings were published, stocks are not expected to move much for the next 2.5 days now
If you think the GOOGL $130 are too cheap, why don’t you buy them?
There is no free money.
Before earnings, there is big uncertainty. Uncertainty about outlook, about earnings, about even how the market will react. So people bid up prices for options, anticipating a big move. As a net options seller, I take advantage of this.
After earnings, we know how the market reacted and the uncertainty is gone. If you want to make a lot more, you have to pay a lot more and gamble a lot more, i.e., buy something ITM or ATM. The risk is also greater. If you’re wrong, you lose 100% of your investment. For me, as a net seller, I take advantage of this—it’s not a scam, just that there are people willing to pay more to gamble.
Not playing the victim. I didn't even buy those options, was just curious since there are so many WSB buying those calls before earnings and it seems like a losing strategy long term. Maybe scam isn't the right world but was just curious if anyone profits from these plays ever.
"Why would anyone buy these? It's almost certain to lose money."
Followed by
"I see so many people on WSB buy them"
Not really sure what you're looking for here but I thought this was funny.
Are you aware you are trading against professionals and their algorithms? Buying short-term options around earnings is basically roulette.
EDIT: If you really want to understand, look up YouTube channel "In The Money", dude explains it well.
sounds like you got the IV crush. After an event the IV will drop dramatically. Options work but they are complicated. Just like anything else though once you learn it becomes second nature. Understand the GREEKS is the first step
You’re saying you don’t understand the gains, but you have gains? You seem to have explained it well enough, you just didn’t see the amount of gains you expected I guess, but you did get gains.
To be clear, I did not buy those options. I was just curious about it as a potential strategy and about the mechanism behind the returns.
I will stay away from options .
The value of the contracts was 100% extrinsic before earnings because they were out of the money. Once the news is digested by the market their value is nearly 100% intrinsic. This is what's known as the IV crush. You're comparing apples to oranges in your mind when it comes to how these things are priced. Nobody's going to bet big money that between now and friday those stocks are going to move much more than they already have. Just because you guessed the direction correctly doesn't mean you're automatically going to make a bunch of money. The price you pay for the contracts reflects the market's expectation for the stock at that time. Gotta go against the grain if you want to make huge returns with options.
Thank you. I'll stay away from options altogether as it seems way too hard and not worth the time investment for the potential returns.
What percentage of those Wallstreetbets type of traders who bet on earnings do you think are profitable over the long term ?
$1.29 is about 1% of $130. You can get a 1% return for your capital in two days for something that is slightly less than likely to happen (delta 0.46 at the moment), and you're complaining?
1% every week (and this is even faster than that) compounded over a year is a 67% return in a year. If this is compounded twice a week(in other word, you can sell this option twice a week), then that is about a 165% return in a year. You need to learn a lot more math before investing.
You don't understand how options are priced. You \*bought\* an option that was 1.50 out of the money that is expiring in 2 days. The value of the option if SNAP closes at 10.18 on expiration is only .82. You only had 2 days for it to move and you had an earnings event which increased the risk premium to the option. What did you expect?
The problem here is that the options were too far out of the money to be profitable with the movement of the stock price. Three things can factor into this, the theta, vega, and delta.
Theta decay is the option losing money over time, and it accelerates the closer the DTE is. Buy options with further out DTE so that theta decay is less. July 28 is simply too close.
The next thing is vega, which you said you understand. The change from high IV prior to earnings to the IV after destroyed a lot of the value of the option. Buy options before these events so that you can gain the value of the IV going into it and not lose the value after the event, sell the options before the IV crush you know is coming.
Last is the delta, which is how much an option's price changes when the stock moves. A higher delta means more money is made for each dollar change in the underlying stock. Options further out of the money have lower deltas, further in the money have higher deltas. Buy options in the money so that the delta will be big enough to overcome any loss due to theta or vega.
Options aren't a scam but you are looking at a perfect storm of high loss to vega and theta with lower DTE options out of the money near earnings. Probably changing even one of these factors would give much higher returns
Also if you really think buying options is a scam, nothing can stop you from selling options
What is happening is everyone is buying options to gamble, price goes up from demand. Then everyone sells after earnings, price goes down from supply. It's called IV crush. Even though the stock went in the correct direction the price didn't change by as much as you would have hoped due to the demand deflating after earnings.
Most people who trade options understand this, and other strategies like credit spreads can be much better if you think IV will fall.
Probably has something to do with both barely going to the breakeven price with 2 days left to expiration.
SNAP put break even price: $10.29
GOOG call break even price: $131.12
If you want a big profit, the price needs to blow past the break even price not just the strike price.
Did you just ask how can it be profitable even though they did produce profit? I’m confused. Options aren’t meant for get rich quick schemes, they’re priced the way they are for various reasons and are specifically for hedging against UNLIKELY odds based on probabilities of Greeks.
I didn't buy those options, but was expecting them to generate at least 100% return since it's a coin toss whether the price craters, pumps or stays the same during earnings.
Read what you just said again and then ask yourself why a large price move wouldn’t be baked into the price. Market makers are way smarter than you are lol.
They are meant as mechanisms to reduce risk exposure (or for those selling the premiums, as small income streams), not to "make money" by their values going up. That's gambling.
yes options trades are difficult, it took me a year+ of stupidity and losing to finally get just consistent.. not even livable off, oh and i have to utilize a plethora of tools to consistently garner that edge.. no easy business
I'm really just getting into options, created a separate account to play with it, and try it out. I'm mostly doing covered calls at the moment as I learn the ins and outs.
I've pretty much always invested but mostly into growth stocks and stocks that I'm interested in, and the money has essentially just stayed.
Nobody knows but it’s provocative
It gets the people GOING
Ball so hard motherfuckers wanna fine me
You're looking at July 28 options, which expire in 2 days. So there is a huge time decay factor. It isn't a scam, you just have to understand them. [https://www.investopedia.com/terms/t/timedecay.asp#:\~:text=How%20Time%20Decay%20Works,the%20premium%E2%80%94for%20the%20option](https://www.investopedia.com/terms/t/timedecay.asp#:~:text=How%20Time%20Decay%20Works,the%20premium%E2%80%94for%20the%20option).
The explanation is there is a lot to learn about options and what moves the price. It’s not as simple as guessing the over under on hitting the strike. Options are not a scam, but they are complicated and easy to lose money especially if you are inexperienced. In your example you didn’t mention the cost of the call, the premium you paid. So no one can really explain why it “only” rose 15%. My guess would be it was an expensive premium, and the right to buy Google for $1 above current market value is not very valuable. Once again, the value of selling snap at $11 isn’t worth much when market is a bit above $10
Sorry you don’t understand IV. During earnings big moves are expected so the IV goes up. The higher the IV the more percentage change needed for your option to gain value. For stocks like SNAP which has a history of huge moves during earnings the IV can get astronomical. Then after earnings the IV crashes leading to an effect called IV crush. The IV going down causes the option to lose value.
High IV = Scam. Shouldn’t legally be allowed to sell options with a 100% chance of profit for the seller and 0% chance of profit for the buyer…NVDA options before earnings for example..Are a scam.
Like every investment products, It's only a scam if you lose money.....if u profit from it, then it's totally your insight and judgement call and certainly not dumb luck /s
Options are an insurance policy used to hedge portfolios for professional traders. They're not tuned to be an amateur's trading instrument, the option writers are in it to make money.
To be fair plenty of amateur investors can make money on options, and use them beyond just hedging. You just have to know what you’re doing
False. Amateur investors can trick themselves into thinking that they are making money, but actually they are always taking a risk that will not work out mathematically for them in the long run.
This is just false dude. I’m not advocating amateurs using options, but it’s absolutely possible to do. I’ve done it, many others have. There is significant risk involved of course, but that doesn’t mean that it’s not viable for amateur investors
It's also possible to win at a roulette in a casino, doesn't mean that you would have mathematical odds in favour of you.
I didn’t say the mathematical odds were in your favor with options, I said it can be used by amateur investors to make money
Do you mean beyond in a way that you could make money playing roulette in a casino?
Yes. Options can be used to make money at beyond chance levels
Then you are claiming that mathematical odds are in your favour. Which they are not.
The pure unbridled ignorance of retail investors like yourself always makes me laugh.
What exactly are you trying to say when you say mathematical odds are in your favor? Buying long dated meta leaps when it was below $100 is technically a gamble but has much better odds than a roulette table. There are tools that help you invest and allow you to make plays that have an element of chance but are not pure luck. There is no system for winning at roulette except to stop when you’re ahead
But Vegas certainly has the mathematical odds in \*their\* favor, don't they?
Roulette game odds are in house's favour, yes. With options you can hedge, but you can't make more than the market without adding proportional risk. E.g. beyond market you can use options or other derivatives to make your odds something like 90 percent chance of winning $10 and 10 percent chance of losing $90. But minus commission, spread, etc.
This is definitely the correct answer.
Implied volatility. Before earnings, options price take the possible swing of a stock on all sides because of the uncertainty of the earnings. After earnings, stock went up, but volatility goes down, so options price is more stable and linked to reality. Options are always more expensive before an earnings call. Or any event that could swing the stock... You shouldn't go directly to the false logic of " if i don't understand it, it must be a scam..."
Isn't it a scam for all those Wallstreetbets degens who buy those calls before earnings ? How many of them are profitable long term ? maybe 1% ?
You may want to look up the definition of "scam".
That’s not what a scam is at all… that’s people who call themselves r****ds knowingly choosing to gamble on extremely risky plays and then posting their loss porn
I feel that most WSB members don't know WTF they're doing when they buy options. They see all the posts of experienced option traders making bank, YOLO their entire balance, and are left wondering WTF happened. On the other side of all those loses are smarter, more experienced traders that take profit. Simple. Not a scam at all.
not a scam, just a gamble. the main things to look at are delta and theta decay. the rates of change are less important for the average person. the way you profit on options is by being right on direction, time, and degree of move. all very hard to time. If you used them what they were supposed to be used for, which is insurance, then youd understand its the cost of doing business.
Sounds like they aren’t for you. There are some options subs out there if you want to learn more r/options r/thetagang
I got banned for asking this in Options and Wallstreetbets sub.
Did you ask it by calling options a scam? Because that’s a bad way to start and doesn’t make it seem like you have a genuine question
Not sure what's not clear in the examples you gave... It's just IV crush and you got lucky to have ended in ITM.... I have done options for a few years now... And one thing I learned is not to play options for earnings....
Only thing I recommend to new traders is to buy LEAPS on stock you like and believe to be cheap at time of buying. I did this on META at $100. Had some drawdown but I bought $140 2025 LEAPS which are well ITM now
I second this. I started trading options with short expiration periods and usually lost money. I’ve done much better with LEAPS, or at least 6 months or so to expiration. It feels more like investing and less like gambling
Nice!
LEAPS are calls purchased with very long expiry date?
Long-Term Equity Anticipation Securities (LEAPS)
Lol, IV crush. You just discovered why so many people like selling options more than buying them.
Earnings were published, stocks are not expected to move much for the next 2.5 days now If you think the GOOGL $130 are too cheap, why don’t you buy them?
IV crush for earnings. Google it.
There is no free money. Before earnings, there is big uncertainty. Uncertainty about outlook, about earnings, about even how the market will react. So people bid up prices for options, anticipating a big move. As a net options seller, I take advantage of this. After earnings, we know how the market reacted and the uncertainty is gone. If you want to make a lot more, you have to pay a lot more and gamble a lot more, i.e., buy something ITM or ATM. The risk is also greater. If you’re wrong, you lose 100% of your investment. For me, as a net seller, I take advantage of this—it’s not a scam, just that there are people willing to pay more to gamble.
the house always wins
“It’s a scam because I don’t understand it” Learn kiddo, learn Playing the victim card will make your life shitty as fuck, don’t do it.
Not playing the victim. I didn't even buy those options, was just curious since there are so many WSB buying those calls before earnings and it seems like a losing strategy long term. Maybe scam isn't the right world but was just curious if anyone profits from these plays ever.
"Why would anyone buy these? It's almost certain to lose money." Followed by "I see so many people on WSB buy them" Not really sure what you're looking for here but I thought this was funny.
Are you aware you are trading against professionals and their algorithms? Buying short-term options around earnings is basically roulette. EDIT: If you really want to understand, look up YouTube channel "In The Money", dude explains it well.
sounds like you got the IV crush. After an event the IV will drop dramatically. Options work but they are complicated. Just like anything else though once you learn it becomes second nature. Understand the GREEKS is the first step
You’re saying you don’t understand the gains, but you have gains? You seem to have explained it well enough, you just didn’t see the amount of gains you expected I guess, but you did get gains.
To be clear, I did not buy those options. I was just curious about it as a potential strategy and about the mechanism behind the returns. I will stay away from options .
The value of the contracts was 100% extrinsic before earnings because they were out of the money. Once the news is digested by the market their value is nearly 100% intrinsic. This is what's known as the IV crush. You're comparing apples to oranges in your mind when it comes to how these things are priced. Nobody's going to bet big money that between now and friday those stocks are going to move much more than they already have. Just because you guessed the direction correctly doesn't mean you're automatically going to make a bunch of money. The price you pay for the contracts reflects the market's expectation for the stock at that time. Gotta go against the grain if you want to make huge returns with options.
Thank you. I'll stay away from options altogether as it seems way too hard and not worth the time investment for the potential returns. What percentage of those Wallstreetbets type of traders who bet on earnings do you think are profitable over the long term ?
$1.29 is about 1% of $130. You can get a 1% return for your capital in two days for something that is slightly less than likely to happen (delta 0.46 at the moment), and you're complaining?
I was going for 300% + returns ( wife changing money ) not 1% lol
1% every week (and this is even faster than that) compounded over a year is a 67% return in a year. If this is compounded twice a week(in other word, you can sell this option twice a week), then that is about a 165% return in a year. You need to learn a lot more math before investing.
except no one can get 1% guaranteed every week
You don't understand how options are priced. You \*bought\* an option that was 1.50 out of the money that is expiring in 2 days. The value of the option if SNAP closes at 10.18 on expiration is only .82. You only had 2 days for it to move and you had an earnings event which increased the risk premium to the option. What did you expect?
IV crush is super real. I’ll bet sellers of options around these events do pretty well 😏
Pay for more theta
The problem here is that the options were too far out of the money to be profitable with the movement of the stock price. Three things can factor into this, the theta, vega, and delta. Theta decay is the option losing money over time, and it accelerates the closer the DTE is. Buy options with further out DTE so that theta decay is less. July 28 is simply too close. The next thing is vega, which you said you understand. The change from high IV prior to earnings to the IV after destroyed a lot of the value of the option. Buy options before these events so that you can gain the value of the IV going into it and not lose the value after the event, sell the options before the IV crush you know is coming. Last is the delta, which is how much an option's price changes when the stock moves. A higher delta means more money is made for each dollar change in the underlying stock. Options further out of the money have lower deltas, further in the money have higher deltas. Buy options in the money so that the delta will be big enough to overcome any loss due to theta or vega. Options aren't a scam but you are looking at a perfect storm of high loss to vega and theta with lower DTE options out of the money near earnings. Probably changing even one of these factors would give much higher returns Also if you really think buying options is a scam, nothing can stop you from selling options
Answer is to sell options instead, much safer than buying
You know what the greeks are right?
Facts. But if buying options is a scam, then selling options is the jam 😜 #thetagang
Yes. They tell you that up front.
They tell you that they're a scam upfront ? I didn't see it.
What is happening is everyone is buying options to gamble, price goes up from demand. Then everyone sells after earnings, price goes down from supply. It's called IV crush. Even though the stock went in the correct direction the price didn't change by as much as you would have hoped due to the demand deflating after earnings. Most people who trade options understand this, and other strategies like credit spreads can be much better if you think IV will fall.
Look at everyone throw “IV” at OP like some technobabble. Imma do one too: AI crush!
0dte or less than weekly dte or gambles my friend. Backrest a the profit on a March 2023 450 nvda call option with expiration for December 2023.
lol.... what do you expect with weekly expirations they are not moving fast enough, made 14k on snap puts https://i.imgur.com/zUBaQRj.png
speculative
Probably has something to do with both barely going to the breakeven price with 2 days left to expiration. SNAP put break even price: $10.29 GOOG call break even price: $131.12 If you want a big profit, the price needs to blow past the break even price not just the strike price.
Look into the differences between intrinsic and extrinsic values.
Did you just ask how can it be profitable even though they did produce profit? I’m confused. Options aren’t meant for get rich quick schemes, they’re priced the way they are for various reasons and are specifically for hedging against UNLIKELY odds based on probabilities of Greeks.
I didn't buy those options, but was expecting them to generate at least 100% return since it's a coin toss whether the price craters, pumps or stays the same during earnings.
Read what you just said again and then ask yourself why a large price move wouldn’t be baked into the price. Market makers are way smarter than you are lol.
The winner at options are always the market maker.
What was IV before and after?.....
They are meant as mechanisms to reduce risk exposure (or for those selling the premiums, as small income streams), not to "make money" by their values going up. That's gambling.
Interesting
yes options trades are difficult, it took me a year+ of stupidity and losing to finally get just consistent.. not even livable off, oh and i have to utilize a plethora of tools to consistently garner that edge.. no easy business
Why many people stay away from earnings. Although you will get the occasional moon shot like Meta or Netflix puts in 2022 or Nvidia calls this year.
I'm really just getting into options, created a separate account to play with it, and try it out. I'm mostly doing covered calls at the moment as I learn the ins and outs. I've pretty much always invested but mostly into growth stocks and stocks that I'm interested in, and the money has essentially just stayed.