Question as I'm normally trading grains and meats only, but decided to get short Emini S&P via a put spread last week... I bought 3300 Feb Puts and sold 3200 Feb Puts, opening a bull put spread.. Average price was 20pts for the 100 pt wide spread. Market (March) was trading at 3323 average entry.... When the market shat the bed over the WuhanFlu, and went down to 3250, or there abouts.... the put spread was only offered at about 40-41... Am I forgetting something about the intrinsic value of such a spread?? WHY is a spread that's 50 pts in the money, with 30 plus DTE, only worth 40 pts? Was there some kind of Greek Crush that I'm forgetting?
That pricing sounds about right. A comparable e-mini spread 50 pts ITM right now 30 days out is about $37. It's mostly the spiking VIX that isn't helping, but the DTE is only a few days less than when you put it on relative to expiration. Long fat tails!!
No, i just went by the spread... Implied Vols on the 3200P were/are significantly higher than the 3300P and I think the gap continued to widen with the fall... For some reason my thinking was that if I was 50pts ITM on the spread, that the spread would be worth at least 50pts...or somewhat close to it... Clearly I miscalculated...?