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Today I bought an RCL put option with a strike price of $25 that expires on 05/01. I paid $7 (a total cost of $700). A few hours later, the quote is $0.01.

It appears that all options are showing $0.01 and any order placed does not get filled. I assume that trading in these options has been halted. If this was due to earnings or a spike in the stock value then I'd understand but I am not sure what's going on here.
so:

  1. What are my options?
  2. Did I lose my money?
  3. Will trading resume?

  • option traders often delete out all offers when the day closes (4pm EST), so the order books would show empty over night. I'd expect option trading to start normally on Mo 9:30 EST, and you probably can see prices again during trading times. But I'm not a specialist. – Aganju Mar 14 at 3:27
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At the end of the trading day, traders pull their offers and the bid and ask price for securities widens. With options, this often goes to the extreme and the bid price drops to zero. This is a common every day occurrence.

However, trading in RCL was indeed halted yesterday morning between 9:54:05 AM to 09:59:26 so option trading was also halted at that time. If that is when you looked at the quotes then that's the answer to your question.

With RCL near $33, you paid $7 for a 5/01 $25 put. On an expiration basis, RCL will have to be below $18 for you to make money. Prior to expiration, you'll might make some money if a drop occurs much sooner.

Prior to the recent market drop, the average historic implied volatility of RCL options over the past year was 30 to 40. During more normal times, your put would be worth 10 cents or so.

The current IV of your put is around 260 which is astronomically high. If the market settles down in the next month and IV contracts, the value of your put is going to shrink for may appear to be no apparent reason.

I would not be presumptuous and suggest that you won't make money on this bet but you sure are swimming upstream, requiring an awful lot of share price drop to get anywhere. And just to be fair. If IV expands even further, that will help your position but I'm not sure that it can get much worse for the cruise lines than it already is. Good luck.

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  • thanks for the insight. I feel rcl is going to be in a single digit within 5 weeks. – SmartY Mar 18 at 16:27

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