UQQ UV Confusion

C

ChadtheRTF

Okay, question here.

I'm an options n00b, and I paper traded a put against the QQQQ, strike price of 48, thinking that the Nasdaq would drop today. As we all know, it did not, yet my option rose in value from 1.61 to 2.04.

How did my option rise in value if the QQQQ rose as well, and my option is out of the money? And what is it that I'm not understanding?

Any help is greatly appreciated!

-Chad
 
You have to be sure that you're getting current quotes and that you're comparing bid to bid (not last trade). With iliquid options, last trade comparison can be misleading. Since it's the Q's, not an issue.

The simple answer is that if the put's value rises while the underlying rises, implied volatility rose.
 
Assuming you are looking at the closing quotes, the bid-ask went down from 1.69-1.75 to 1.60-1.66, last went up from 1.64 to 1.76, and IV went up from 22% to 23%.

With the delta of about -0.46, vega of 0.08 and QQQQ going up 0.37, the option price should drop by about 0.09 (0.37*(-0.46)+0.08). And if you look at the bid ask quotes, that is exactly the amount they dropped by.
 
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