Simple question about options

[rbigsby]

as a followup, to my earlier question, do most ATM options have a delta of exactly 0.5 or do some differ substantially from that value??

 

[rbigsby]

st play with an options calculator: https://optioncreator.com/options-calculator

not sure what parameter to use for Volatility or Risk Free Rate. Plus I'm trying to price a weekly option not yearly one. given that the volatility value has such a large affect on the price, unless you can know that value very accurately i dont see how this calculator is useful. i thought there should be a formula i could put into my spreadsheet to compute the option price automatically. guess not.

 

[TheDawn]

who determines options prices and how they change as the underlying stock price changes? just curious.

Read about options in investopedia.com.

 

[newwurldmn]

Now convinced it's a pitch in the dirt.

whats this idiom? I’ve never heard it but I like it.

 

[newwurldmn]

not sure what parameter to use for Volatility or Risk Free Rate. Plus I'm trying to price a weekly option not yearly one. given that the volatility value has such a large affect on the price, unless you can know that value very accurately i dont see how this calculator is useful. i thought there should be a formula i could put into my spreadsheet to compute the option price automatically. guess not.

the world uses black scholes (or variations) to value options. Read up on it and you will understand your questions.

 

[earth_imperator]

not sure what parameter to use for Volatility or Risk Free Rate. Plus I'm trying to price a weekly option not yearly one. given that the volatility value has such a large affect on the price, unless you can know that value very accurately i dont see how this calculator is useful. i thought there should be a formula i could put into my spreadsheet to compute the option price automatically. guess not.

The formula is a little bit complicated as it has many input parameters and uses (log)normal distribution (if that tells you anything).

You have to convert the days to years, ie. 7 / 365 = 0.019178 years
There are other option calculators on the web which work with days instead of years.

For risk-free rate you can simply use 0, or do you know a bank which gives you more if you deposit your money there for a year? If yes, then just enter that % rate.

Here you can see actual volatilities for each strike:
https://www.optionseducation.org/toolsoptionquotes/options-quotes
First choose the company, for example AMD, then choose the option expiration date, then study the Implied Volatility for each strike therein...

These are really absolut beginner's questions, man! As said you need to buy a book at amazon or wherever that explains the options basics to absolute beginners...

Also your other questions about delta etc. are based on the Black-Scholes-Merton equation results. Just see the "option greeks" at wikipedia.
ATM Delta is not always 0.50, it depends on the params of the option.

 

[earth_imperator]

its serious questions. thanks for your answers. i'm reading them all. but that black scholes equation is too complicated to bother with you would need a degree in mathematics to understand it.

That's true!

 

[Secatu]

If you use a good trading platform (i use TOS, etrade, and TastyWorks) you dont have to worry about it. They do all the underlying fundamentals for you.
If you wanna get down and dirty, buy the book. I think you can get it on Amazon for like $60.

 

[ETJ]

"What's this idiom? I’ve never heard it, but I like it."

A pitch you don't swing at. OP didn't want answers as he had been given the answers. IMHO just wanted someone to badger.

 

[BlueWaterSailor]

whats this idiom? I’ve never heard it but I like it.

Post #1: "I'm having some slight difficulty understanding the N(-d1) term in the BSM. Can someone elucidate?"

[Replies go into painstaking detail, show sources and derivations with footnotes, etc.)

Post #2: "BTW, I'm not sure about this 'standard deviation' thing you people believe in. I've also heard that 1+1 doesn't actually equal 2 but depends on the diet and toe nail length of the person calculating it."

I've stopped ascribing malicious intent to those long ago. Nowadays, I just nod and move onto other things as soon as I recognize the dynamic.