Here's the setup when the stock was at 34-35: Long TOL May 35 Put @ 2 Short TOL May 30 Put @ 0.2 Max profit = 35-30-1.8=3.2 @ below 30 but I'm not seeing it now even when the stock is at 29.5. Is it because the short put still has some TV left? Should I keep holding on to this position until expiration assuming it will stay below 30?
options are most pumped up near strike.... 50 / 50 chance of going in or out of the money hence their premium... think of them like insurance policies...if you are not sure if you need one...then you do
That is one of the drawbacks of spreads. You usually have to wait until expiration to realize a significant profit. Yes, if you think it will stay below 30 hold on until expiration then unwind it if you don't want to be assigned. Don
I'm also losing TV on the long 35 put. Does the TV on the long and short positions pretty much cancels each other out? Do I still need to close the long 35 put at expiration if it expires ITM and I don't want to exercise?
If the 30 put has more total TV than the 35 put then the TV decay would also be higher. Certainly if the underlying is below $30 that would be the situation (i.e., 30 put decaying faster). Yes you need to sell the 35 Put if it is ITM and you don't want to exercise (You are scaring me with this question, you should do more reading on options). Don
Suggestions: Study options before starting to trade them. Use an options calculator and an options analyzer. Start with small options positions until you learn to trade them. Good luck!
Additional suggestion: learn the basic concepts of the "greeks". This will allow you to realize when you will lose money, and when you will make money.
Today is expiration but the position is still not trading at max profit if I close it at market. What gives? It's currently ~$200 off max profit for 10 contracts.
The reason is the bid/ask spread and any remaining time value. Strictly speaking the max profit is reached when the options actually expire.