Long put and market crash

If you own a long put and the market crashes, would you delta hedge or sell the put?

 

your basically calling a bottom or at least he pinnical of fear to close the long put position to make the most out of it .

 

How would you hedge (with stock or with other options)? If you hedge with stock, what would you do with your eventual gains in volatility if the option is not deep in the money?

 

Sell the put.

One of two scenarios:
1. Put deep in the money and you clean up balance sheet
2. Put has time value and vol is probably bid - you can monetize this.

 

Interesting.

Could you give an example of these two ? Thank you

 

All he means is 1) if the put is ITM then it has (potentially) loads of intrinsic value so you sell it at a profit and 2) if the put is OTM and the market crashes, then increase market IV increases the time value and you can still sell at a profit.

In case #1 you're profiting on a directional move and it case #2 you're profiting on an increase in IV.

 

so if he sells the underlying in this scenario that the puts go deep ITM ?

 

Side question:

Can I exercise a long put and that would have me short the stock or ETF?

I don't ever read of someone doing this to maintain a short position past the put's expiration.

 

you can do that.... but in my experience its best not to roll from one position to the next, psychologically its better just to go flat and reassess..

 

#1 is just about keeping a clean book. Delta hedging creates two lines in your book and takes up balance sheet (funding) and risk capital.

#2 doesn't mean the put is necessarily out of the money. Just not so deep in the money that it doesn't have any optionality left.