I'm half ninja. I slipped by while they were interrogating people who use SCT and some guy who had himself tangled up with Prof Logic's ergodic "system," and then I easily limboed under a Fibonacci retracement and here I am Also, I'm not a bad trader; I just don't know anything about options.
1a2b3cppp to reduce the risk you could sell the QQQ Aug 2011 52.00 put for $0.66 http://finance.yahoo.com/q?s=QQQ110820P00052000 Buy QQQ Aug 2011 55.00 put @ $1.19 Sell QQQ Aug 2011 52.00 put @ $0.66 Debt $0.53 - Maximum loss $53.00 If the QQQ reaches $54.55 by August 13 - I week before expiry - you would break even, give or take a few pennies.
123, I think there is something wrong with your data on the heatmap thingy. If the put option is ITM you won't lose money. It's in the Money, you only lose when its far away from your strike.
You know if you buy a $55 put and the stock is at $55.01 at expiration you lose money. Hmm that does not seem far away from the strike....
The answer to the question as it relates to the chart is time decay. Part of the premium that you paid when you bought the put was "Time". This portion of the premium will be gone at expiration and your option will need to be ITM by an amount GREATER than you paid for the time in order to be profitable.
ITM means exactly that - ITM. Profitability is a different question. I very much doubt you read anywhere that an option finishing ITM gives the holder a "profit". CAN give? Yes. DOES give? Only if you bought it at the right price and it finishes deep enough ITM.