Theorotical Value Calculation: Stock Option

Einstein

Well-Known Member
#1
Hello all.

I am starting this thread for new trader like myself, where we can discuss on the stock option. clear our doubts about options pricing, strategies, technical studies etc. Hope this will be helpful for other fella traders!!
 

Einstein

Well-Known Member
#2
Can any expect explain why the TCS put price is not increasing with the decrease in stock price?? any suggestions??

 

Einstein

Well-Known Member
#3
My guess is Its because of low delta value of put call, can anyone clarify this??
 

DanPickUp

Well-Known Member
#4
@Einstein

1. If you talk about a specific option in your thread, could you please be a bit more specific like where the underlying is at the time you ask and what option strike with expiration date you talk about. I had a look at your screenshot. As every thing is very small, at least on my computer I not really can see all the details.

2. To come to your question: Otm option have a lower delta. That can be one reason why the option only changes slowly in value. If you have f.e a delta of 20, then your options price will only make a price change of 20% at the moment the stock moves one point to it.

3. An other impact to any change of an option pricing has the volatility. If the standard volatility on the underlying is decreasing, usually the Implied volatility in the options are decreasing and that means that even if you could be right in direction and market is moving towards your position, you would not make or even could lose money on it. Vise versa to volatility increase.

4. An increase in interest rates will drive up call premiums and cause put premiums to decrease. To understand why, you need to think about the effect of interest rates when comparing an option position to simply owning the stock. Since it is much cheaper to buy a call option than 100 shares of the stock, the call buyer is willing to pay more for the option when rates are relatively high, since he or she can invest the difference in the capital required between the two positions.

5. Dividends are the next factor which can have an impact on stock options. Cash dividends affect option prices through their effect on the underlying stock price. Because the stock price is expected to drop by the amount of the dividend on the ex-dividend date, high cash dividends imply lower call premiums and higher put premiums.

6. And the last point is the time decay. As more as you are near expiration, as quicker you lose time decay on your otm option. If you run a deep in the money option, then time decay short before expiration has very little impact on the price of the option.

Take care / DanPickUp
 

Einstein

Well-Known Member
#5
try clicking on the top yellow bar of the Image!! It will maximize the image. All details r there..
 

Einstein

Well-Known Member
#6
Yes Its because of extreme low delta value.. TCS put calls(all) were a death trap for Traders..

Can anyone highlight the importance of Black Scholes model when it comes to valuating options??
 

DanPickUp

Well-Known Member
#7
Yes Its because of extreme low delta value.. TCS put calls(all) were a death trap for Traders..

Can anyone highlight the importance of Black Scholes model when it comes to valuating options??
Mister

Did you ever hear about Google and did you ever read any books by your self about any thing in option trading? It even was already explained a few times in the past in the forum. There is a search section which you can use in case you do not know that.
 

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