I just stick to the basics… Stocks that I am very confident in going down (HBs, CFC, etc.) you look at the current price and what the option price is. Say CFC was at $35 (not anymore!) and an Oct. $30 put was $1.50 per contract, it would have to go down to $28.50 or lower by expiration to make money off of it at expiration. I was expecting it to make BIG moves down past $30 way before expiration so there would be multiples in the gains. I don’t stay in until expiration and try to get out way before on the big moves.
The last couple of weeks before expiration you can see Puts deteriorate greatly due to time factor.
Back to the point though. I saw CFC going to ~20 by October so $30 puts would make big money in that respect at only $1.50. If CFC had come down to $35 from say $70 in a short time before I decided to buy Puts the IV would likely have added a couple of dollars to their price before I bought them making them less appealing at ~3.50 estimating.
You have to take all of this into account when gambling with it (and it is gambling!). Buying BSC puts right now will cost you 3X more than they would have 3 weeks ago so unless you expect them to go down 3X as much it’s not a good bargain. I think they are going into the toilet so I am still considering those.
