I bought a put option yesterday 10/20/22 with a strike price of $26. The price of the security was at $28.00, and the expiration set for 11/18/22. The security price dropped to $20.00 overnight. Why is my option almost worthless now. The IV was at 43% when I bought it. Also, if I hold and the price comes back up will my option gain value?
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There's no way a put that is $6 in-the-money is "worthless". It's possible that you just have no bids for that strike, of the broker is just not showing you the actual value. If nothing changes you will make a $6 profit when the put expires (if you buy the security at $20 and exercise the put at $26).– D StanleyOct 21, 2022 at 15:48
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1What is the underlying ticker?– Hart COOct 21, 2022 at 15:49
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ACI or Albertsons– LaraOct 21, 2022 at 16:14
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@D Stanley - Today was the ex-div date for a $6.85 special dividend so the options were adjusted to reflect that.– Bob BaerkerOct 21, 2022 at 23:30
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3 Answers
Albertsons is merging with Kroger so their options are likely no longer tradeable on many brokers (set to closing only). As such you'd likely have to exercise the put to close your position and realize gain. There's a special dividend related to the merger so mind the timing.
Albertsons announced a Special Cash Dividend of $6.85 per Class A share with an ex-dividend date of October 21 (today).
As a result, the options have been adjusted and the 'Deliverable Per Contract' is now 100 shares Albertsons and $685.00 Cash.
answered Oct 21, 2022 at 23:28
Also, if I hold and the price comes back up will my option gain value?
No, puts have negative delta; if the price goes up, your option will lose value. They are essentially partial shorts: you lose money if the stock doesn't go low enough, but unlike a full short your loss is limited to the premium.
