Dow Falls 900

 

📉 Scenario: Dow Falls 900 Points in One Day

Let’s assume:

You bought a 1-day, in-the-money put option on a Dow ETF like DIA (which tracks the Dow).

The Dow fell ~900 points, or about 2.5% to 3%.

You held the put to expiration (same day).

🔍 What Is an In-The-Money Put?

An ITM put option means the strike price is above the current price of the stock/index, so:

You already have intrinsic value at the time of purchase.

When the stock/index falls further, the value of the put rises fast.

💰 Example: Buying an ITM Put on DIA

DIA ETF = ~$365 the night before

You buy a $370 Put (ITM by $5)

You pay around $6.00–$6.50 premium per contract (=$600–$650)

The next day, DIA falls to ~$356 (a ~900 point drop in the Dow)

📈 How Much You Could Make

Your $370 put is now $14 in-the-money ($370–$356 = $14)

The contract now trades near $14–$15

Your gain = (New value - cost) x 100 contracts

✅ Profit:

→ Bought at $6.50 → Sold at $14.50

→ Gain: $8 per share × 100 = $800 profit per contract

→ Return on investment: ~120% in one day

🔁 Why This Works

Put options gain value fast when the underlying falls quickly

Being ITM protects you more because you already have value

Same-day options = high risk, high reward due to leverage

⚠️ Risk Reminder

If the Dow didn’t fall or went up, you could lose most/all of your premium

0DTE (zero-day-to-expiration) options move fast and decay quickly