We all remember what happened to LinkedIn's shares just about two weeks ago: The stock collapsed by over 40% in just one day - a three sigma event that made some lucky options traders incredibly rich. As for me, I quickly realized that the market has grossly overreacted. I knew that worse-than-expected guidance for the year is not great news but the stock did not deserve such a beating, especially given the fact that the company has still posted (and plans to post) double-digit growth rates in the top line and solid margins. Then I got greedy. I bought ATM call options with a strike of $110 per share expiring in early March (the underlying was trading at $110.36 per share). The stock then touched the $100 mark and then bounced above $116 per share. My options are now in-the-money. Am I making money now? No, I wish I was. The one single important factor I missed when making a trade is implied volatility. My greed and eagerness to get into the trade as soon as possible blurred my rationale and I failed to realize that option traders also knew that the stock would bounce back and were selling calls with large premiums (relative to historical volatility). This way, I bought options at $8.45 apiece (fees excluded), while now they are worth around $7.40 apiece despite being modestly in-the-money. A quick calculation shows that I bought the options with an implied volatility of almost 72% per annum! (Source: option-price.com) Now let us see what the IV is today: (Source: Yahoo Finance) Implied volatility has gone down by 25 points since I initiated my position! Even though I am $6 in-the-money, the value of my options is still underwater by 12% due to this volatility crush and time decay. I still have about 10 days until expiration. With the price action around the stock today, I have a feeling that I will recover the cost of the options (I need the stock to go above $119 per share or so) and even a small profit. The key takeaway here is that you have to be very careful with the options due to the nature of the instruments and market specifics. In this particular case, I would be better off purchasing LinkedIn's stock (even with leverage). The bottom line is: do not be too greedy in investing because greed trumps your rationale and calculations!