I explain why here.
Read that first.
Yesterday I entered the following positions in order to prepare:
4 contracts XBI Sept. 15, 2017 61 PUT, at $0.19 a contract, total cost $76
17 contracts XBI Sept. 15, 2017 62 PUT, at $0.21 a contract, total cost $425
From July 18th, 2015 (today) to the low on August 24th, 2015, XBI fell 33%.
I’m expecting something similar to happen again. My guess is August 27th but it could be any time before October.
If what happened then plays out again, the target low on XBI will be $52.50.
At that price, the 61 PUTs will be worth $8.50. The 62 PUTs will be worth $9.50.
Total risk = $501
Maximum gain on 61 PUT: $3,324
Maximum gain on 62 PUT: $18,801
XBI on August 24th, 2015: