We have an urgent Tesla update to discuss today as well as my new price target for the stock — see why I think TSLA could hit $700 by 2026 and get my free report LIVE at 1:30 PM ET for Stonkamania
Sometimes the market hands you a textbook example that’s too good not to break down. This week, Bank of America (BAC) had its Investor Day — and what happened in BAC’s options chain was absolutely wild.
The stock dropped 1.4%. Nothing crazy, right?
But here’s where it gets interesting: the $52 strike puts dropped 43%. That’s not a typo — those puts tanked.
This was a volatility crush in its purest form, and if you understand how this works, you can position yourself to profit from it consistently.
Why Corporate Events Can Destroy Option Premium
The mechanics here are simple but powerful. When BAC held its Investor Day, the implied volatility that had been priced into the options collapsed immediately after the event.
It doesn’t matter what the stock actually does — up, down, sideways. Once the uncertainty is gone, the premium evaporates. That’s the nature of these scheduled corporate events.
I saw the same thing play out in Citigroup (C). The puts cratered, and this is what premium sellers live for — selling elevated volatility before the event and buying it back for pennies afterward.
Don’t Get Fooled by Your Broker’s Marks
Here’s something that trips up a lot of traders during these volatility events…
Your broker’s spread pricing can look completely wrong because of the way it’s calculating the two different legs in a simple vertical spread.
The puts were down in value, which is exactly what you want if you sold premium — which we did for my Friday Profit Plays strategy, and we’re up nicely today on our weekly credit spread.
But the wide spreads make the marks look insane, like you’re down in the position when you aren’t. Market makers adjust their pricing during these volatile moves, and your account might show some wild P&L swings that don’t reflect reality.
The key is understanding what’s actually happening beneath the surface. The premium is collapsing — that’s the real story. The wide spreads are just noise from the market adjusting to the new volatility environment.
This BAC setup was a perfect example of how selling premium ahead of scheduled events can work in your favor. Know when these catalysts are coming, position accordingly, and don’t panic when your broker shows you funky marks because you should know your floor going into the trade that the underlying stock’s price can’t fall below.
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. I Have an Urgent Tesla Report – See It Now!
After calling Tesla’s rise to over $400 last year, I believe the stock is on its way to $700 by 2026!
My new Tesla report details the five core reasons behind this projection and how best to exploit it weekly.
We develop tools and strategies to the best of our ability, but no one can guarantee the future. There is always a risk of loss when trading past performance is not indicative of future results. From 07/20/2023 – 011/6/25, the average win rate on live published trade alerts is 75%. The average return on options on both winners and losers is 24.06% over a 4-day average hold period.
