Here's my set up:
ATM Straddle Cost $7.65
HOOD Breakeven Low @ Expiration $76.35 -9.1%
HOOD Current Price $84
HOOD Breakeven High @ Expiration $91.65 +9.1%
Implied Vol 128%
Expected Vol Full Crush (vol points) 61.9
Delta $-1.48
Gamma $8.41
Vega $5.95
Theta $126.20
Post earnings expected range +/-15.8%.
Full vol crush = -4.4% of stock price.
Crush adjusted move +/-11.5%.
Implied move +/- 9.1% so options are cheap!
However, only 36% of last 11 EA opening gap exceeded implied move. When the stock moves, it moves. But when it doesn't it doesn't.
So tough decision to make on this one.
If full Crush occurs, expect to lose $3.70, or nearly 50% of the straddle price, so we'd need a big move to pay for it.
Conclusion: When in doubt – sit it out! There will be many more, more favorable set-ups before the earnings season is over.
Robinhood ($HOOD) Earnings Trade Vol Crush Setup – Tough Decision to Make!
byu/GammaReaper_ inoptions
Posted by GammaReaper_