Option price

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stockoptionstrader

How can you calculate what your option premium will be worth if stock goes up x dollar?

Also, is it always like that or is it possible that the underlying stock goes down and the option doesn't move because of less volume?

Next time it moves on volume will it go up much more then?

Can someon explain?
 
use an option model/calculator and plug in the numbers
assuming you're referring to calls then the stock could go down and the option not move if implied volatility goes up. volume is irrelevant.
 
The delta of an option is where you will get that estimate. Keep in mind that the assumptions that go into the value of an option, can change at any time so it's just an estimate.

25 delta, stock up 1 point, option up .25. Stock down 1 point, option down .25

as the stock moves, time passes and ivol changes, this delta will change in value.
 
stockoptionstrader said:
How can you calculate what your option premium will be worth if stock goes up x dollar?
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Simple asnwers are above. A deeper answer is that there is no clear-cut answer to this. The "fair price" for the option (the way CyJackX is defining it) is just an interpolated value with other option prices.

There have been cases when calls gotten richer even though underlying gone down (check out Eurodollar options in September 08). There have been cases when vol skew kinked up due to extraordinary amount of option selling (check out Euribor options in 2006). There have been cases when people opted to early-X DITM puts due to the cash funding pressures. I am sure between myself, newworldman and Martinghoul there are enough anecdotes to fill a small book.
 
Imagine you had bought the FB Sept 3 $126 Calls on (9-1-2016 after churning almost 2000 contracts the prior day), you bought several hundred contracts pretty cheap and had your order in before the Market Open(10 Minutes) to capture the Consolidated Opening Print if that's even possible with Options because it does not seem like that anymore.


Seeing your priced your Calls too cheap and notice the Specialist gaped FB up to our highest level since the Earnings downtrend what would you do? I had over 300 contracts to sell wanting to get the highest price plus volatility of the Open where would you put your sell price at? Before you look at the Time and Sales try to figure out where you would price the stock at if you thought it was going to open at $126.6 and changed your order when it hit $126.8 last seconds.

Second, use this little tool because its pretty handy once you add in all the extra premiums. Its too conservative not giving us enough volatility price.



http://www.cboe.com/framed/IVolframed.aspx?content=http://cboe.ivolatility.com/calc/index.j?contract=E8CB37FB-F8FC-4977-BB01-11AE4C5DDC9C&sectionName=SEC_TRADING_TOOLS&title=CBOE - IVolatility Services
 
Its funny how Option Openings work, unless you use a limit order you will get fried. Why do some Exchanges allow orders to go live at 9:30:00 with really freaky prices like Amex and another strange Exchange where its not uncommon to see orders filled at $2 even though the Bid x Ask is $.70 x $.92?
 
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