Basic Options Question

[PaulRon]

If I get an SPY 100 put option for April 11 that is $.31, (and SPY is 128.25 now), does that mean I would make the difference 28.25 if SPY hit 100 by april 11 or, approx 100:1 on my money?

 

[Martinghoul]

Quote from PaulRon:
... if SPY hit 100 by april 11...

This bit isn't right... It ain't about hitting, but about being there at expiry.

 

[nazzdack]

Quote from PaulRon:
----an SPY 100 put option for April....
----that is $.31....
----SPY is 128.25 now....
----I would make the difference 28.25 if SPY hit 100 by april....

1) No.
2) If you were "short" the SPY shares from 128.25 to 100.00, you would earn $28.25 per share.
3) The SPY/April/100/put would increase in value to where the SPY/April/128/put is now, $4.28 per option, AND HIGHER....because of expected implied volatility expansion.

 

[spindr0]

Quote from PaulRon:

If I get an SPY 100 put option for April 11 that is $.31, (and SPY is 128.25 now), does that mean I would make the difference 28.25 if SPY hit 100 by april 11 or, approx 100:1 on my money?

No way, no how

What you might make would depend on when the SPY hit 100. Sooner, you might make 10-20X, depending on what IV does. Much later, much less,

 

[spindr0]

Quote from nazzdack:

[3) The SPY/April/100/put would increase in value to where the SPY/April/128/put is now, $4.28 per option, AND HIGHER....because of expected implied volatility expansion.

But what if it's a slow gradual decline and it doesn't get near 100 until expiration week? Perhaps what the Jan 128p is worth now? OMG, I got skewed!!!! :eek:

 

[tsaw]

Quote from PaulRon:

If I get an SPY 100 put option for April 11 that is $.31, (and SPY is 128.25 now), does that mean I would make the difference 28.25 if SPY hit 100 by april 11 or, approx 100:1 on my money?

For the your Q if Spy hit 100 by Apirl Expiry , your 100 put options is worthless & you will have lost your 31 cents .

Starting off in options trading ?

 

[chartman]

Quote from PaulRon:

If I get an SPY 100 put option for April 11 that is $.31, (and SPY is 128.25 now), does that mean I would make the difference 28.25 if SPY hit 100 by april 11 or, approx 100:1 on my money?

The SPY 100 put option would only have value if the underlying SPY trades below 100 on or before April 11. As the SPY underlying price decreases toward the exercise price, the put option could increase in value less consideration for time decay. If the underlying price stays at or above the exercise price on the expiration date, the option will expire worthless.

 

[tomk96]

is the SPY is trading below 100 by april expiration, there are bigger troubles to worry about. just sell it.