Options Price

I have a question for you all here. This is a paper trade I did. I bought a put on Amzn on Wednesday. I bought when the stock price was right at $1882.14.
I did two practice trades, I bought the $1885 put for September and October to compare results for the extra time bought.
This morning (two days later) The stock was down over $22 but my option only increased in value by $5.00. The delta ( and I know Gary doesn't look at delta) was hovering between 47 and 50 so I figured I should have gotten $10 on my option.

I watched the option all day long and saw that when the stock price went back up near to where I bought it I was still down in option value by around $5.00

It just closed at $1882.22, right at where I bought it two days ago and I lost $6.45 on the option and that is comparing ask price to ask price, not even taking into account the spread,.
My question is how did this loose so much value in two days? It's not like I bought the weekly or something.

Thanks for any input.

You got hit by a decrease in implied volatility, another thing Gary never mentioned in my pre-Survivor classes. Implied volatility started down early on Wednesday. Since the vega (measure of volatility of an option) is around 2.36 for the 1885 Sept. monthly put, this means for every 1% decrease in implied volatility the option price will change by $2.36. I believe implied volatility decreased from 26% when you bought your option to 24% today. Theta is at -.68, so you lose $.68 per day on your option from time decay. So 2X2.36 plus 2X.68 = $6.08 or so loss in your option price just from these factors. I admit that the daily chart did show close to a HRFP, but the weekly still shows AMZN in a strong uptrend, so I'm not sure I would have made this trade. Hope this helps a little. BTW, if you use a platform like Think or Swim you can plot historical volatility and implied volatility on the same study to check what's happening.

Although Gary never explained it this way (I understand he did not want to overly complicate things), the reason you insure any trade through earnings is because implied volatility typically rises into earnings and then usually gets crushed as soon as earnings are announced. This will tend to kill any existing position's profit most of the time unless you have a good reason to keep the trade going and you insure your profit.

+1 for Dan's answer on implied volatility. It's been 5 years or so since I did any non-Gary trading but I did quite a bit of testing/trading strategies that relied on inflated IV. One of these strategies was playing IV deflation immediately following earnings. I'm over simplifying but you basically sell near term calls or puts a day or two before earnings a few strikes OTM and then buy back after the earnings announcement at a much lower price to capture the difference. Again, over simplifying as you need to understand a little about statistics and be able to read a chart. Knowing the stock tendencies following announcement could also help. That said, it was a lot of work. You HAVE TO BE AVAILABLE between 9:30 - 9:35 the morning immediately following the announcement to capture the best profit or be ready to play defense and roll your position if it goes against you. Use TOS to make your decisions because everything is right there including the necessary stats, odds, etc. You are giving yourself roughly a 68% to 90% chance of being right but for those numbers to work in you favor, you need a high number of observations (i.e., trades). Some folks using these strategies make 1000+ trades each year. Too much like a 2nd job so I moved on to pure GW strategies/teachings. It did teach me a lot about option pricing and the manipulation heading into and out of events. It also gave me much more confidence when considering some GW strategies around selling options.

-NCT

Thanks Dan for the input. I saw that the weekly was still strong going up, but this was just a play on the pull back. (play it up and play it down).
The 233 had already crossed and like you said the daily was about to cross. I did get $5.00 on the option when I realized that it was not acting properly I just got out and took my profit.
I'm just starting to get back into this and doing my practice and asking questions.
Again, thanks for your input.