Newscorp! Ahhhh, the bain of all option buyers. This stock has whacked more option traders I reckon than anything else. It wasn't till I understood Volatility did I click as to why.
This isn't really an alert as such, because the situation has always been, and will likely continue. It's more of an observation.
Have a look in the bottom pane in the chart above. Have a look at the IV, it's been generally between 18% and 25%. Now have a look at the red line, the 30 day SV. It's generally oscillating between 13% and 18%.
Now have a look at the 100 day SV, (this gives us an idea of "normal" SV) it's at 15% and generally doesn't vary much from that.
It's staring everybody in the face isn't it? This stocks options are chronically overvalued... by an average of about 5%.
That means that if we buy options, we are paying more than what is warranted by the stocks normal movements.
Then the inverse of this must be true, yes? If we sell options, then we are generally recieving more premium than is warranted.
That gives us an edge if we are sellers. I don't suggest naked sales mind you...puts maybe if you want the stock someday, but definately short spreads, because over time the odds are firmly stacked in your favour.
Whats more it looks as though this has always been the case, have a look at the longer term chart:
NWS options have pretty much always been overvalued, and it's why all those option buyers in NWS get slaughtered. Eventually the numbers are stacked up against you; you are working with the edge against you.
Anyone profitable long term buying these options, I dips me lid.
In fact I will dub you options knight of the realm, worthy of the title Newcorp Templar, a true mercenary