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Is there any way to reverse engineer options data to find good stocks?
- Thread starter 1a2b3cppp
- Start date
Quote from 1a2b3cppp:
Two similarly priced stocks may have totally different option prices, so I'm wondering if this data can somehow be used to discern certain information about stocks that people who don't look at options would not be privvy to.
Higher option prices =
Earnings coming up.
Important scheduled announcement (FDA)
Volatile stock (usually some tech stock)
Quote from 1a2b3cppp:
Two similarly priced stocks may have totally different option prices, so I'm wondering if this data can somehow be used to discern certain information about stocks that people who don't look at options would not be privvy to.
You sounded noobish. Similar priced stocks have different P/E, Beta, volume, and etc...
Options derive their value from stocks, not the other way round.
Any student of pedagogy learns that different people have different learning styles. If someone learns better via dialog over just reading, his style should not be deprecated but encouraged.Quote from cvds16:
please start to read a few good option books instead of opening one thread after the other asking silly questions about options ...
Quote from 1a2b3cppp:
Two similarly priced stocks may have totally different option prices, so I'm wondering if this data can somehow be used to discern certain information about stocks that people who don't look at options would not be privvy to.
The major component in option pricing is volatility. So if two similarly priced stocks have totally different options prices then the most likely culprit is the volatility. However, all this tells you is that one stock is or is expected to be more volatile than the other. It doesn't tell you the reason though. It may be due to a number of reasons, but generally, it may due to the different types of business/industry (e.g. utilities vs tech) and/or an upcoming earnings or some other type of important announcement.
So it should be evaluated on a case by case basis.
Quote from jkgraham:
Couldn't the options show you weather the market was bullish or bearish on the stock? How could you see that from looking at the stock alone?
It would be quite a stretch if you could forecast the weather from stock options! (Sorry mate, couldn't resist it!)
The correct spelling is "whether" not "weather".