1% on the strike price direction means 100% gain for call/put options? . I have bought a call option with a strike price of 25.00 usd, the current stock price is 24.39 and the option price was 10.00 usd. If the new stock price is now 24.63 usd (1% on the direction of strike price : 24.39 + 0.01 x 24.39 = 24.63 ) the new option price will be 20.00 usd?
How to calculate option gains?
- Thread starter Joseph1980
- Start date
Are those magic mushrooms?
1% direction == 100% gain! something is horribly wrong here! May want to gain some understanding before you flush money down toilet.
Perhaps if you post what option/expiration, etc and when, you may get some useful feedback.
Learn the Greeks before you start trading. Do NOT think in terms of % rather think of it in dollars. The primary driver of option price change is a function of Delta, Gamma, and Vega.
Say you buy an at-the-money option with a .5 delta. This means if the underlying stock rises 1 dollar your option value will increase by roughly 50 cents. Gamma will also have a very small influence. Vega will also influence an options price when Implied Volatility changes.
I found this book very informative and an easy read -
Trading Options Greeks: How Time, Volatility, and Other Pricing Factors Drive Profits
Say you buy an at-the-money option with a .5 delta. This means if the underlying stock rises 1 dollar your option value will increase by roughly 50 cents. Gamma will also have a very small influence. Vega will also influence an options price when Implied Volatility changes.
I found this book very informative and an easy read -
Trading Options Greeks: How Time, Volatility, and Other Pricing Factors Drive Profits
And the following is a good companion to the above mentioned book.
How to Calculate Options Prices and Their Greeks: Exploring the Black Scholes Model from Delta to Vega (2015)
www.amazon.com/Calculate-Options-Prices-Their-Greeks/dp/1119011620/ref=sr_1_1?dib=eyJ2IjoiMSJ9.H7TD9XTYErY00drTR0kcuZVFYqA5i2O73RI9lapLusXDVu3YULX2a-2p6BsSHYZ54zZ6JXW-17EvK0FzA1vmTRnqEDIYNECd6OCksvjTYQxQWsO9jNn1jeG9svVjPCWmiZwNtUETD7HN9zxgbRXA5qLJLTA2xExnAA10Qz3KfXfkRzlT3MzTLT_s1cz6-tRGbv69A5Y6OGPA69_j3v6TDSvFX8D9fi6M7_SrFE4fc8w.opFWxZJU5Vf2n_sStjVKdLGZ2DJ4Vze5qPS_ectz5kM&dib_tag=se&keywords=How+to+Calculate+Options+Prices+and+Their+Greeks%3A+Exploring+the+Black+Scholes+Model+from+Delta+to+Vega&qid=1714767006&s=books&sr=1-1
Thanks for the suggestion. Unfortunately, I just bought the last available copy on Amazon.
Although I "think" I have a good handle on the Greeks I am always up for more knowledge.