The value of an option is a function of time value and intrinsic value.
The time value when you bought your puts was about $1.60. There was no other value because they were out of the money (the QQQ was trading above 42).
The time value erodes as we get closer to expiration. To figure the time value, you can roughly take the difference between the intrinsic value and the actual value.
For example, if a QQQ 42 put is trading at $1.50 when the QQQ is trading at 41.50, the intrinsic value is $0.50 and the time value is $1.00.
Anyway, if you wish to figure how quickly your time value will erode, you can divide the time value by the number of days until expiration.
Time value is not a great function when the options are deep in the money, and that's why I think if the QQQ hits 39 I can sell my puts for $3.40 or so.
Anyway, I hope I was of help. I think we'll hit a local bottom either Friday or Monday. Daily Stochastics are turning down and may bottom and bounce by then.
Oh, by the way, the Delta is another function of the pricing of options. As the market becomes more volatile and has wild price swings, the volatility gets priced into the option prices. Since the volatility is low now, the option time value prices are dropping a bit quicker. If the volatility gets higher, the time value will not erode quite so quickly. |
