How to assess if an ATM Option is cheap and worth buying?
- Thread starter antares66
- Start date
Cheap is relative. A $6.00 call option could be cheap if it is deep in the money and say, 1-2 months till expiration. You are essentially, renting that call option for two weeks or 10 days. Time decay is faster, the closer to option expiration. Although, looking at NIO's daily stockchart looks it is going higher, if I were to buy a call option, I would choose maybe, a call option deep in the money with 1-2 months till expiration. That would make it July 16 or August 20 as the expiration. That would give me more than enough time to be right.
Of course ;-)
Do yourself a favor and forget the Greek alphabet for now. If you are asking this question,its too soon.
Secondly,its a 2 week option...
Look at the 9-14 day ATR/ATR percent..Determine if its high or low...
If the option doubles to triples in price with a 1 ATR move,its worth a shot and POSSIBLY cheap..
Secondly,its a 2 week option...
Look at the 9-14 day ATR/ATR percent..Determine if its high or low...
If the option doubles to triples in price with a 1 ATR move,its worth a shot and POSSIBLY cheap..
- It depends on your view of the underlying.
- What do you think NIO could be trading at on June 25?
- You could be a seller or buyer.
So how do you usually answer yourself each time you ask?