Pricing question

CaptainObvious

CaptainObvious

I received the following e-mail from a friend who is a rookie options trader. Since I know squat about options pricing I thought I'd post it here and see what you guru's think.
I am amazed at what I am seeing in a QQQQ put that I am in. As I write this, the Nasdaq is down 30 points and the QQQQ down .80 from where I bought in with a .31 Delta.

The Delta is now .38 and the actual option bid price is only .09 higher than what I bought in at????
The QQQQ is .80 lower from where I bought and the option is only .09 higher?
You know darn well that if the put option im playing would be going against me at this rate (.80 higher) that I wouldve lost considerably more than .09.
It seems that it is so stacked against you even when the trade IS going your way. Man, im frustrated with this!

It just seems to me that it should be up more than .09 when the Delta as risen .08 since I bought over a 2 day period. Time decay isnt really eating anything up over 2 days.

What gives, any thoughts?

Rich
 
Quote from CaptainObvious:
I am amazed at what I am seeing......Man, im frustrated with this!
More...
1) An eMail from a "friend" and your name is "Rich", okay.
2) It would be good if you had revealed the option price, strike price and trading month.
3) It's possible that there is a "volatility crush" happening at what I would guess is your out-of-the-money strike price because the recent downmove is slow and orderly. There isn't panic-buying of put options.......yet. :cool:
 
Quote from nazzdack:

1) An eMail from a "friend" and your name is "Rich", okay.
2) It would be good if you had revealed the option price, strike price and trading month.
3) It's possible that there is a "volatility crush" happening at what I would guess is your out-of-the-money strike price because the recent downmove is slow and orderly. There isn't panic-buying of put options.......yet. :cool:
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Ever the skeptic. :p Actually my name is George and some people here can vouch for that. The e-mail is what it is. Makes no sense to me, and neither do options, which is why I rarely trade them except when I feel like gambling and am to lazy to drive to the boat.
 
Quote from CaptainObvious:
.....Actually my name is George.....I am too lazy to drive to the boat.
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?.....you're an architect and you live in the Chicago-area? :D
 
Quote from CaptainObvious:

I received the following e-mail from a friend who is a rookie options trader. Since I know squat about options pricing I thought I'd post it here and see what you guru's think.
I am amazed at what I am seeing in a QQQQ put that I am in. As I write this, the Nasdaq is down 30 points and the QQQQ down .80 from where I bought in with a .31 Delta.

The Delta is now .38 and the actual option bid price is only .09 higher than what I bought in at????
The QQQQ is .80 lower from where I bought and the option is only .09 higher?
You know darn well that if the put option im playing would be going against me at this rate (.80 higher) that I wouldve lost considerably more than .09.
It seems that it is so stacked against you even when the trade IS going your way. Man, im frustrated with this!

It just seems to me that it should be up more than .09 when the Delta as risen .08 since I bought over a 2 day period. Time decay isnt really eating anything up over 2 days.

What gives, any thoughts?

Rich
More...

If the puts expire within a week, then two days' time decay will eat all your profit. Also sounds like he bought OTM puts, which is not that sensitive to stock move.
 
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