You gotta love those option hedges....Not!

HMMMMM.

So I put some QQQ option hedges in my retirement account last week. One of the hedges I put on was the 168 March 16 expiring puts. If the price of the QQQ falls (a proxy for tech stocks), the options will go up in price.

The price of the QQQ fell sharply of course. and that decline - along with volatility increase - sent the price of the options much higher. Great. The position, along with others, hedged a lot of losses in the portfolio. I was happy.

When I looked to get out of some of the protection at the opening today, I brought up the price, and for the option that is in the money by over $9 (the price of the QQQ is at 158.90-92 at the time with 168 strike price), the bid and ask price showed $7.66 bid and $9.75 ask. That is huge.

I know volatility is coming down - after spiking - but something that has an intrinsic value over $9 (at the time), it does not make sense to sell at $7.66. That would be a risk free arbitrage for an option trader on the other side.

You gotta love those option hedges.....Not!