Posted 4/8/2021 19:28 (#8940581 - in reply to #8939410) Subject: RE: LRP Questions
Bleeding time value doesn’t matter in this example. If you buy a put, count it all as cost and don’t watch it’s value erode in a stagnate market. If you pay $6/cwt for a $160 October put, understand your floor is $154. If at any point in time you decide you would rather own a different put, sell the 160 for whatever it brings and buy a different one.
It’s easiest to think of options on the basis of what they will be worth on expiration date, depending on where the market is at on that day.
To use my previous numbers. if, upon options expiration day, the market is anywhere above 160, the put is worthless. If it expires at 154, you got your $6 back, or rolled into a short futures. And if it’s at, say... 140, you profit $14/cwt.
The way the options value changes day to day shouldn’t matter, unless the market does something that makes you want to change your risk position.