Why would the put option price go down when the stock goes down? 3/19 $20 strike down 30% when gme stock down $50. Can someone explain why the put isn’t gaining value?

  • 1
    Most likely because implied volatility tanked at the same time - read the marked duplicate. – D Stanley Feb 1 at 17:21
  • It's a conspiracy to screw you. All prices are actually set by a cabal of lizard beings. – Fattie Feb 2 at 2:39

From the linked question in the comments, my answer there was:

The major reason is that options gain in value when implied volatility increases and they lose value when implied volatility decreases. So if there's a large underlying price move in your put's favor (GME drops) and the put loses money, it's because there was a sharp contraction in implied volatility.

Here are some ultra simplified rough estimate numbers for the $250, $275 and $300 puts for 2/19 expiration, not meant to be accurate because that gets a bit detailed.

Their implied volatility on Friday was about 5.80% which is an insanely high number. Right now, their IV is about 4.90%. That's a heavy duty contraction and these 3 puts lost more than $30 of value due to the IV contraction. Since these are 20-25 delta options, the gain in put value from GME's drop was not enough to offset the IV contraction hence they have lost value today.

  • If the answer is the same, the question should be closed as a duplicate. – D Stanley Feb 1 at 18:01
  • The answer is a bit different but if people want to close it, it's fine by me. – Bob Baerker Feb 1 at 18:04

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