MBI Jan 35 Puts

R

RetailBuilder

I purchased these 3 months ago and am looking to now exit. However, they are priced at intrinsic value only at best - sometimes not even that. No time value at all.

WHY?
 
The stock is in the low 20's, very far from your 35 strike. Think intuitively. Ignoring interest considerations for the moment, how much different is holding your put option vs holding short stock? The main difference is that the put does better if the stock goes back up through 35. But that is looking very unlikely judging from the market prices. Look at the Jan 35 call for guidance. It is worth less than 20 cents.

When a put option is essentially the same as a short stock position, it will be priced very near intrinsic.
 
Yes, I see that now.

That makes sense, yet I had not looked at it from that perspective.

Thanks for the help, I sure do appreciate it.


Quote from KPS21:

The stock is in the low 20's, very far from your 35 strike. Think intuitively. Ignoring interest considerations for the moment, how much different is holding your put option vs holding short stock? The main difference is that the put does better if the stock goes back up through 35. But that is looking very unlikely judging from the market prices. Look at the Jan 35 call for guidance. It is worth less than 20 cents.

When a put option is essentially the same as a short stock position, it will be priced very near intrinsic.
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