in the underlying Stock ?
I am looking for a way , that I can get a rough estimate as to what an outright Call or Put that I buy , will be worth when the stock moves X amount in my favor ( per $1 move the stock moves, $3 move, $5, $10, $50, etc. )
I know that Time value is a factor in this, but I am basing this on buying OTM options ( 6 months out till expiration minimum, with the average being 1 year or more out to expiration )
These Options will be purchased way out of the money ...... with the average option costing between ( .25 - $3 ) ..... depending on the Stock and stock price of course, being a factor as to how much I can expect to pay for these otm options
And lastly , this will also assume that the stocks moves in my favor rather quickly ( although I know realistically this certainly does not happen all of the time )
These purchased Way OTM options are more of a Lottery play/trade you could say , but when I am expecting a BIG move in a stock , and for that move to " Hopefully " occur soon after I buy the options , I would like to have an Idea as to what my .50 purchased Calls for example will be worth, if the stock moves $5 in price , and does so with at least 4 months left till expiration
Side Note ( we will also assume that the Options we trade, have good Volume and O.I , as well as tight spreads between the bid x ask )
EXAMPLE:
Lets say stock XYZ is trading for $60 a share
We expect XYZ to make a BIG move to the upside ( from technical analysis ).... a Break Out trade
We buy the $70 otm calls with 8 months till expiration for $1
Now, do we expect it to get to $70 .... Likely not, but it's not impossible, as this stock has traded as high as $70 in the past
So if XYZ moves $6 with 3 months left till expiration, what can we then expect are $1 call to now be worth ...... $7 ish ?
Hopefully my question(s) make sense
Thank you for any and all help and input
I am looking for a way , that I can get a rough estimate as to what an outright Call or Put that I buy , will be worth when the stock moves X amount in my favor ( per $1 move the stock moves, $3 move, $5, $10, $50, etc. )
I know that Time value is a factor in this, but I am basing this on buying OTM options ( 6 months out till expiration minimum, with the average being 1 year or more out to expiration )
These Options will be purchased way out of the money ...... with the average option costing between ( .25 - $3 ) ..... depending on the Stock and stock price of course, being a factor as to how much I can expect to pay for these otm options
And lastly , this will also assume that the stocks moves in my favor rather quickly ( although I know realistically this certainly does not happen all of the time )
These purchased Way OTM options are more of a Lottery play/trade you could say , but when I am expecting a BIG move in a stock , and for that move to " Hopefully " occur soon after I buy the options , I would like to have an Idea as to what my .50 purchased Calls for example will be worth, if the stock moves $5 in price , and does so with at least 4 months left till expiration
Side Note ( we will also assume that the Options we trade, have good Volume and O.I , as well as tight spreads between the bid x ask )
EXAMPLE:
Lets say stock XYZ is trading for $60 a share
We expect XYZ to make a BIG move to the upside ( from technical analysis ).... a Break Out trade
We buy the $70 otm calls with 8 months till expiration for $1
Now, do we expect it to get to $70 .... Likely not, but it's not impossible, as this stock has traded as high as $70 in the past
So if XYZ moves $6 with 3 months left till expiration, what can we then expect are $1 call to now be worth ...... $7 ish ?
Hopefully my question(s) make sense
Thank you for any and all help and input
