Help Pls.

D

didig@inbox.com

Guys,

I'm new and i have a few questions that will sound dumb to you but.... reality is I'm not an option expert like you and teachers (as I guess you know) are NOT great

So I'd really appreciate a little help :) .

These are my difficulties:

when I look at option quotes for instance on marketwatch i see for instace that a call stike 130 has a quote when the stock is at 140+ (so it seems it's not exercized)

1) does it mean that this is an european option (or an opt. that can be exercised only at maturity)?

2) in an europ. option, for instance a call, if i see the stock going up a lot and want to lock the profit can I sell short the stock at that level (so that at expiration i get the difference between the strike and the price at which I shorted)? Is it easier to just sell the option??

3) I took some prices from marketwatch (I also attached a file)
the call on citibank with 15 days to expir. stike 15, stock @4.81 is worth .04
1 week later, 8 days to expir. citi @ 4.88 the call is still worth 0.04. How come theta did not kill the price??
Are these quote updated or it's not true that theta kills the price fast in the last days??? I'm confused
:confused:

4)in the black-scholes model I understand that you multiply the stock price * delta (=N(d1)) but then I do not understand the 2nd part Xe..* N(d2)...:confused:

Thanks a lot guys!!!
 

Attachments

Quote from didig@inbox.com:

Guys,

I'm new and i have a few questions .....

when I look at option quotes for instance on marketwatch i see for instace that a call stike 130 has a quote when the stock is at 140+ (so it seems it's not exercized)

3) I took some prices from marketwatch (I also attached a file)
the call on citibank with 15 days to expir. stike 15, stock @4.81 is worth .04
1 week later, 8 days to expir. citi @ 4.88 the call is still worth 0.04. How come theta did not kill the price??
Are these quote updated or it's not true that theta kills the price fast in the last days??? I'm confused
:confused:
Thanks a lot guys!!!
More...

I'll try help with a few of these:
Stock at $140+, but call prices of $130.
This is perfectly normal - these are called In the Money or ITM options. You didn't state how long of a term these options are. Someone may want to purchase these because they can make money as the stock continues to rise. There is no reason they have to be exercised. Buying a 130 call simply states that you have the option but not the obligation to buy the stock for $130/share up to expiration. The stock could in theory go to say $170 and the $130 option would now be worth at least $40 ($4000).

Options are always going into and out of the money based on stock price movement - ITM and OTM is just what it is at that moment. In general, you can buy or sell any listed options, however of course if you sell DITM options they may be exercised immediately (if there is basically no time value left)

As far as the options on C go - I assume you mean $5 strike - you mention $15, but the picture shows $5 strike. So, those have been kept up apparently because the stock has gone from $4.81 to $4.88 - quite a bit closer to $5. They are and were cheap enough that some people will gamble with an option like that (very risky though). Also, I have no idea about this, but if someone suspected news in C, or even in the financials next week, they might still be willing to pay some money to bet that C will go over $5 within a week.

Hope this helps a bit.

JJacksET4
 
Quote from didig@inbox.com:

when I look at option quotes for instance on marketwatch i see for instace that a call stike 130 has a quote when the stock is at 140+ (so it seems it's not exercized)...does it mean that this is an european option (or an opt. that can be exercised only at maturity)?

It means that you can pay the ask to buy or receive the bid to sell... has nothing to do with Amer vs Euro options

2) in an europ. option, for instance a call, if i see the stock going up a lot and want to lock the profit can I sell short the stock at that level (so that at expiration i get the difference between the strike and the price at which I shorted)? Is it easier to just sell the option??

You might consider this if the option is trading below parity but never do this if there is time premium (TP) remaining. Just sell the option to close.

3) I took some prices from marketwatch (I also attached a file)
the call on citibank with 15 days to expir. stike 15, stock @4.81 is worth .04. 1 week later, 8 days to expir. citi @ 4.88 the call is still worth 0.04. How come theta did not kill the price?? Are these quote updated or it's not true that theta kills the price fast in the last days???

Several variables determine an option's price. Theta took off some TP but 7 cts of underlying rise and maybe some implied vol increase offset it.

4)in the black-scholes model I understand that you multiply the stock price * delta (=N(d1)) but then I do not understand the 2nd part Xe..* N(d2).

and understanding this will help you make money how?
More...
 
Thanks you VERY much guys really helpful, if anyone else can help me with what is left I'd really appreciate it.

It's amazing one learns more here than.... where one should...

A BIG thank you,

D.
 
You must log in or register to reply here.
Back
Top