Source: https://siliconangle.com/2022/02/03/sna ... et-profit/Snap shares fell 23.5% in regular trading today, to $24.50 a share. The earnings report dropped after the bell and the share price turnaround in extended trading was remarkable. Snap’s share price surged by us much as 62% before settling up 59%
Is it possible to make money the more a stock price fluctuates? Yes it is according to the book in the litterature section below. Kevin-Connolly's book "Buying and Selling Volatility" explains how.
Let us assume that you bought at the money put options priced at USD 10 000 on Snap before Meta delivered the Q4 results and Snap dropped more than 20 %. Then, near the bottom you sold the put options and bought call options on Snap for the amount before Snap delivered the Q4 results.
I have not done any calculous on the strategy, but it dosen't surprise me if you made USD 100 000 in one day on the gearing you aquire with options.
The problem is of course to identify that Meta would deliver worse than expected results and drag down Snap. You have to understand options (volatility) trading so this is not for uninformed traders. Tumultuous price moves can create opportunities in a stock and in true volatility trading you can forget price movements. The more the price fluctuates, the more you make. You have to know that options prices are very dependent on volatility and that the option time value (Theta) decreases with the square root of the time to maturity.
FOR THAT REASON, THIS POST IS NOT FOR INEXPERIENCED TRADERS.
Litterature:
https://www.amazon.com/Buying-Selling-V ... 0471968846
Semantic links:
https://www.forbes.com/sites/abrambrown ... 135a2c743c