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?
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.