$2000 Profit Off First Option Trade

Fundlord

Fundlord

Bought 100 SPY 195 JANWK2 PUTS for $33 per contract so total capital outlay was 3300$ and its showing a pnl of about 2K but the underlying is still so far away from the strike price ???

I dont get it, I'm up like 60% on the original investment and I'm nowhere near the 195 strike level, I was under the impression that the underlying must surpass the strike for me to make any money or else the option is deemed worthless.

I usually trade the underlying via futures/cfds and this is my first time dabbling with options.
 
Fundlord said:
Bought 100 SPY 195 JANWK2 PUTS for $33 per contract so total capital outlay was 3300$ and its showing a pnl of about 2K but the underlying is still so far away from the strike price ???

I dont get it, I'm up like 60% on the original investment and I'm nowhere near the 195 strike level, I was under the impression that the underlying must surpass the strike for me to make any money or else the option is deemed worthless.

I usually trade the underlying via futures/cfds and this is my first time dabbling with options.
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When you bought the options, they were worth $33, right? So that right there invalidates the statement you made about the options being worthless until they hit the strike price.

Your positive PnL is the result of the probability of these options becoming worth something increasing, simply put. Consider reading Natenberg or something like that before you start swinging 100s of SPY contracts around--not trying to be a dick, just want to help. Congrats on a good first trade.
 
Fundlord said:
Bought 100 SPY 195 JANWK2 PUTS for $33 per contract so total capital outlay was 3300$ and its showing a pnl of about 2K but the underlying is still so far away from the strike price ???

I dont get it, I'm up like 60% on the original investment and I'm nowhere near the 195 strike level, I was under the impression that the underlying must surpass the strike for me to make any money or else the option is deemed worthless.

I usually trade the underlying via futures/cfds and this is my first time dabbling with options.
More...

Total WTF.

How can people trade options without reading even basic information about the subject?

"and I'm nowhere near the 195 strike level". SPY at 199 isn't close to 195?

Enjoy your current $2K profit. It won't last if you keep trading like this.
 
cjbuckley4 said:
When you bought the options, they were worth $33, right? So that right there invalidates the statement you made about the options being worthless until they hit the strike price.

Your positive PnL is the result of the probability of these options becoming worth something increasing, simply put. Consider reading Natenberg or something like that before you start swinging 100s of SPY contracts around--not trying to be a dick, just want to help. Congrats on a good first trade.
More...

I have Natenburg's book on hand.

Just to clarify to everyone this was a paper trade on optionsxpress :p

I would never risk 3K blindly.
 
Fundlord said:
I have Natenburg's book on hand.

Just to clarify to everyone this was a paper trade on optionsxpress :p

I would never risk 3K blindly.
More...

Whew! We were concerned.

My advice to you at this juncture...is to write a book and start doing seminars on how to consistently do what you just did.
 
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