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Lennar Corporation Message Board

  • sherlockshah sherlockshah Jan 18, 2008 7:37 PM Flag

    i have a question on puts, my 12.50s if it opens or closes under that

    my contracts are in the money. The last trade shows to be 1.27, what would the price be if the stock does hit 12.50 like it shows after hours?? WOuld the put price jump to 2 some dollar or 3?? if it goes under 12.50 or does it lose the put value or will gain. The reason why I ask this is because my DNDN options got goofed when it lost value even though very close to price.

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    • The Put value can be divided into two components.
      1. The time value of the option.
      2. The "In the money" value of the option.

      If the Feb Put is for 12.50, and the stock is above that price, all of the value is the time value of the option, for it is not in the money and has no intrinsic value other than time.

      If the stock is "in the money," it would be below 12.50. If it were at 11.50 at expiration, then each Put would be worth $100.

 
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