Percent to Double

Quote from GatsbyGirl:

Where can I find or how can I manually calculate the % to double on an option?
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You would always have to re-calculate since IV and time to expiry changes.

You could just look at the option chain and do a quick calculation in you head to figure out the % move required to double the option.
 
Quote from lenwhistler:

You would always have to re-calculate since IV and time to expiry changes.

You could just look at the option chain and do a quick calculation in you head to figure out the % move required to double the option.
More...

OK so I stink at figuring this stuff out. Can you help me figure one with the following example?

Stock: AUY
Current: 10.70

May 7.50 CALL
Ask: 3.40
Spread: .30
Delta: .97
Intrinsic: 3.20
Time: .20
IV: 88.84
 
If all other factors being equal, if the stock was trading at roughly $11.65 your option would double in value. don't ask me how to calculate, i eyeballed from my profit & loss graph from the thinkorswim platform.
 
% to double is a bs figure invented by one of those news letterguys that has no relevance in that it does not take in to account any other factors that effect an options price.

It's a useless number IMO but here it is

(1/delta)/stock price

(1/.97)/10.70=0.096348 or 9.63%


target stock price
(% to double + 1) X stock price
(0.096348+1)*10.70=11.73093
 
It's a lot faster to use some software pricing model. That way you can adjust for iv and time decay also and play around with the different scenarios/greeks.
Daddy's boy
 
Quote from volatilitypimp:

If all other factors being equal, if the stock was trading at roughly $11.65 your option would double in value. don't ask me how to calculate, i eyeballed from my profit & loss graph from the thinkorswim platform.
More...

I don't know the exact definition of % to double, cause I think it's useless, but how in the world would a $3.4 option with a delta of 0.97 double in value if the stock moves up by $1!?

I.e. we have an option price $3.4
Delta 0.97
stock @ 10.70.

10.70 to 11.70 is $1*0.97=$0.97. $0.97+3.4=4.37. Doesn't look like a double to me.:confused:
 
Ahm. You have delta, you have gamma, you have original price. From Taylor expansion, you can describe the change in option value as

Change = UndChange * Delta + .5 * Gamma * UndChange^2

So, solving a quadratic equation (3rd grade, i recon), we get

Double Change = [ -Delta +/- Sqrt(Delta^2 - 2 * Gamma * CurrentOptPx) ] / Gamma
 
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