Until the Puts are "in the money", meaning that the strike price of 1050 is greater then the actual value of the S&P 500 index, everything in the price of the Put right now is a premium....there is no actual internal value of the Put. The Premiun is what erodes over time, and gets closer to zero as expiration day gets closer. However, the closer the S&P gets to 1050 the higher hat Premium will rise in anticipation of it obtaining actual value. If the index falls below 1050, it will gain 1 point of value for every single index point it goes below 1050....so if the index drops to 1000...that's 50 points below the strike price and if you bought the Puts at 0.5....that 100 times your money just right there, not to mention the Premium built in as well. It's not something you want to hold over to expiration, especially if the market does not go down any further, as the premium price will just erode and you will gradually lose away your profit. That's why you use it as a lotto ticket and just buy a handful. I could have bought well over 1000 of these things, but I only put a small portion of my capital into it. The payoff will be big anyway if it happens. My time frame is into Mar 2-5th, but could be as long as the 15th, depending on the market situation if they become, "in the money". Keep watching here as I will post when I cash them in.
Velo |
