Does the price of underlying stock matter?

[jalexander]

Does the actual price of a stock affect the price of the call options.

For example if I can buy at the money call options on a $1000 stock for, say $10. If the stock moves 2% to $1020 Ive doubled my money.

On the other hand a $10 stock with $1 atm call options, a 2% move will only get it to $10.02.... Nowhere near breakeven.

What am I missing?

 

[nazzdack]

Quote from jalexander:
----What am I missing?

Do you score "well" on standardized verbal tests but "poorly" on standardized math tests?

 

[jalexander]

Very funny.

I guess what im saying is If a $10 stock has a $1 atm call option. A $1000 stock should have a $100 atm call option, but this is not what i see.

 

[jalexander]

Oh i see... $10.20 not $10.02 lol

 

[justrading]

Quote from nazzdack:

Do you score "well" on standardized verbal tests but "poorly" on standardized math tests?

Don't be unkind to the newbie. I was once and the chap left and never came back.

OP, recalculate your examples, a bit more carefully this time.

 

[pikachu9]

Markets are efficient. No advantage to buying ATM calls on a $1000 stock vs. a $10 stock because calls on higher priced stock will be more expensive.

 

[stock777]

mostly efficient. there are some peculiarities to high priced stocks and options that all the pros here are aware of Im sure.

 

[jalexander]

Quote from pikachu9:

Markets are efficient. No advantage to buying ATM calls on a $1000 stock vs. a $10 stock because calls on higher priced stock will be more expensive.

The answer I wanted, thank you.

 

[jalexander]

The reason I asked is some options guru says he buys $0 to $3 options, but not the more expensive options which I found odd because he considers them "more expensive".

 

[newwurldmn]

Quote from jalexander:

The reason I asked is some options guru says he buys $0 to $3 options, but not the more expensive options which I found odd because he considers them "more expensive".

He's clearly not a guru.