So I’ve been trading options for a few years. I understand the definitions and fundamentals but never found myself asking this question. I don’t often exercise (since you make less anyway), but I find myself in an annoying spot. The put is currently ITM (should be profitable) but is not due to theta and IV crush. If I exercise, would I be profitable since I’d be buying 100 shares then selling for a higher price?
EDIT: QQQ 475P Exp Sep 16
Current price: 474.67
Cost: 262
Can I avoid theta by exercising a put?
byu/AdministrationBorn73 inoptions
Posted by AdministrationBorn73
6 Comments
What stock, what strike, what expiration, and how much did you pay for the put?
(The short version is no, because the option will always be worth *at least* the exercise value. But if you provide the details I’ll break it down.)
Dude, first off, you haven’t provided enough information. Second, this is an easy thing to calculate.
No, you paid 2.62/ share for the put and effectively selling for 33c by exercising.
Exercising to avoid theta decay doesn’t always make sense. You’ll buy the shares at the strike price, but then what? You’ll have exposure to the stock’s movement.
If you’re bullish, selling the put might be smarter. You’ll collect some premium and avoid potential losses if the stock drops further.
Think about your outlook for QQQ. [Investopedia](https://www.investopedia.com/options-basics-tutorial-4583012) is great for brushing up on options strategies.
> The put is currently ITM (should be profitable) but is not due to theta and IV crush.
This is illogical. Saying it should be profitable taking only one of the factors that affect option prices into account, its like saying my car should be valuable because it is low mileage, but it also got hit by a truck.
Do the math on you profit and loss on exercising — if the market were open right now and those prices were still the same you would net out roughly .33 and you paid 2.62 per contract.
I think you should just wait until Monday, you are evaluating it using after hours prices on the equity and the price at close of the options.
The equity keeps trading but the options stop so all the prices you saw for your put were based on a $475.34 close price and you were OTM at that price.
Options prices will reflect current equity price at 9:30 am, reevaluate then. There’s always some theta on qqq it is heavily traded.