Larry --- Please calculate for me what my profit would be if I bot 1 DIA put --- strike price of 92 --- 05 leap --- with a cost of $9.70/per contrct --- DIA price at the time $92 and the price of the DIA fell to $82?
It depends on how long it takes DIA to get down to $82. If it takes it until expiration to get there, your put will be worth $10 (92 minus 82). If you paid $9.70 for the put, you only made 30 cents (10 minus 9.70).
On the other hand, if DIA gets to $82 in the next few months, then you’ll probably have a pretty nice profit because the option will still have a lot of time value. To understand options, it’s important to understand the Greeks.