OK, now factor in probably a wide bid/ask spread (probably at least a dollar) and there you go, all the extrinsic premium is gone. On to next problem....world peace.
Nobody in the professional world uses the word premium to associate with intrinsic value. Premium is always assumed to be just that, "premium" as in "over and above".
The options greeks are fine. They are simply partial differential equations. Math works fine in the real world.
Then with Greeks such nonsense like in the said scenario comes out. No doubt about it, I like maths as well. But I'm a real-world practicioner, not a theorist.
His complaint stemmed from the idea that he had no idea what the difference is between intrinsic and extrinsic premium. Guys, this is why the regulators make brokers qualify clients before they can trade options. And this is why most on ET lie on those applications only to file complaints when they don't understand the stuff they lied about understanding to get access to trade the products they probably never should have been trading in the first place.
Hmm. but you are not consistent b/c you said "Nobody in the professional world uses the word premium to associate with intrinsic value", but in the above statement you exactly did that yourself... In the scenaro he even assumes/fears that his options are worthless when he says "It seems like I lost $6.40 somewhere", ie. the whole $6.40 he had paid for, implying a 100% loss, whereas in reality he made a profit of at least 368% (or 384%)!...
No, my point is valid. He confused "extrinsic" with "intrinsic". His Extrinsic value IS mostly gone. Not his "intrinsic". LOL. Nobody should be allowed to trade options before they understand this and I'm not a huge regulation guy, but I absolutely support rules to keep that guy from trading options, especially if he has dependents.
It was about the usage of the word "premium". That you already said in this thread, you are just repeating yourself.
Premium is always assumed to be "extrinsic". I had to additionally define "intrinsic" since that was the so-called premium the trader was referring to. Nobody associates in the money premium with premium. If you google the world premium, which I just did for you, you get: "premium (Commerce) the amount above nominal or par value at which something sells"
"Option Premium" has always meant price. I think the question was written as a put. He bought a put struck at 20 with spot at 20 and spot rallied to 50 and he's wondering why he lost money.