Monday, June 29th, 2015

generally, do put options increase in value as expiration nears?

that was my observation. . . Has anyone else noticed that too? And please share some of the strategies and options to take when the comercioOtra question: How did the WEEK EXPIRATON share price? NO IT at least a little lower?

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7 Responses to “generally, do put options increase in value as expiration nears?”
  1. Peter R says:

    It depends how the actual stock is doing

  2. Toro Gringo says:

    40 years ago options were bought and executed, by “going onto the street”.
    I “day traded” using calls and puts, and did pretty well.
    Now to answer your question, at that time, IF a CALL or PUT option had a profitable stance, it did go up in value, however that option’s value is much more volatile, with any price fluctuation, closer to the expiration date.
    I do not know your position, status, or attitude concerning options.
    I will only say that 1. I sat beside an elderly gentleman daily who also day traded in options, and I witnessed him losing $250,000.00 in ONE HOUR BECAUSE HE DID NOT WANT TO PAY A LOT OF EXTRA INCOME TAX !!!
    Son, it is hard to go broke when you are making a profit !!!!!!
    When you have a reasonable profit, TAKE THE MONEY !!!!
    Also remember this saying ” PIGS GET FAT, HOGS GET SLAUGHTERED” !!!
    GOOD LUCK<
    toro gringo

  3. Alex says:

    You cannot generalize this observation. The put option will only increase in value if the stock is moving down, and even then it is not a given.

    In the expiration week stocks sometimes get pinned to the strike. Again, there’s no general consesus that the stocks move down.

  4. Oh Boy! says:

    Generally, (everything else staying the same) all options decline in price as expiration nears. This decline is exponential so option prices decline more rapidly the closer you are to expiration (again, everything else staying the same).

    There is some research that indicates that stocks move toward the nearest strike price as expiration nears. This comes from market makers buying and/or selling stock to hedge their option positions.

    If you’re interested in trading options I’d suggest Sheldon Natenberg’s book titled “Option Volatility and Pricing”.

  5. andrewtrades says:

    Put options usually increase in value only if the price of the underlying asset is moving downwards, and/or if implied volatility is increasing, which adds to the option’s premium.

    If neither of those things is happening, then all options, calls and puts, will actually LOSE value as they approach expiration due to “time decay.” This is why options are often referred to as wasting assets.

    There are some theories that suggest that some assets, including some stocks and indexes, tend to gravitate towards a specific option strike price on expiration day, but those are really just theories and aren’t necessarily a reliable way to make money.

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