Hi Shoppers,
You’ve heard the term “premium crush” or “vol crush”.
On the trading floor we used to say I was “taken downtown”.
I am referring to the implied volatility or the price of options, going down.
It’s a real thing.
Your stock can move your way but your options are unchanged or even worse … lower.
Check this out.
I bought TQQQ at the money calls for Jul24 expiration on Thursday at 3:45 PM. I paid $2.80. The stock was trading $76.36 and the implied volatility was 62.71.
Friday afternoon at 12:44 PM the stock was up $.52 and my options were trading $2.71 – down $.09! The implied volatility went from 62.71 to 57.66 in 3.5 hours of trading.
That is what we call a premium crush.
This generally happens when your stock moves up very slowly. Not a lot of action up or down, just a slow march higher is when you get this phenomenon.
Some of it is also the weekend effect meaning the market makers have to take two days of premium out of the options.
On Monday morning they can actually open a tad bit higher.
When this happens, you can cut yourself lose and take the small loss on the trade or if you have true conviction of your trade, that is the chart is screaming higher, you hang on and get that move in the stock to move your options.
That is what I am doing as the QQQ chart is looking very bullish into next week:
This makes it not too late for you to hop into those TQQQ Jul24, 2026. I am in the 76s but with the stock at 77 go for the 77 calls.
Thank You For Reading … See You Next Tuesday,
Licia Leslie