In the afternoon of Thursday, December 9– we bought around $2,000 worth of SPY 206 puts expiring next Thursday.
This position does not require additional margin– just the cost of the option which is 2.73, or $273 per contract.
We don’t plan to hold this through expiration since we don’t want to be exposed to Theta decay. But since we expect an imminent drop– we will try to hold this as close to expiration as we can. Once we see a bounce potential, we will take off the trade.
Since we bought the 206 strike and it costs 2.73– the break even is just over 203.27. Anything below that will be profits. Of course if it gets there before expiration then our option value will increase already and we may realize those gains so we don’t pay the theta time decay cost.