|
PureBytes Links
Trading Reference Links
|
Dave,
One explanation is that volatility of GE is close to 50% compared to 23% of OEX.
Thus, the change in value of option is proportional.
cboe's website http://www.cboe.com . they have plethora of information, even for most advance
option traders. Use their option calculator as a guide line. they also used to publish historical
volatility. seems like they have suspended since feb 2001. but you can use option calculator to
calculate the implied volatility of a stock/index. Just punch in the stock price, strike price,
expiration month and the current value of the call, and voila ! You get the current implied
volatility. Then you can change it and see how the option of the value will change as it
increases/decreases. Also, change the stock price keeping volatility constant. Write a spreadsheet
using BS method and play around with the numbers. You can probably find already written somewhere
on the web.
Personally, I divide OEX options by 10 to get a feel of option prices. Can't handle
option prices over $5 in my mind :-) Becomes too complicated :-)
So, i'll say, oex is at 63.00 and option 63 call is at 1.30. Hmm.. thats cheap !
then i'll compare that to at the money QQQ or GE or XYZ option. That will give me
a real idea about the volatility of the oex vs the stock.
thanks
mudit
--- makkems@xxxxxxx wrote:
> Thanks again mudit - although I understand the concept of volatility in
> pricing options it still seems that oex options are overpriced. For example,
> a system I have signalled a sell in the OEX on Monday. The at the money
> options were $14 therefore for 1 option I would have paid $1400 and would now
> have a profit of $250, for a percentage gain of 17%. At the same time the
> closest strike for GE was $1.75 so I could have bought 8 and would have a
> profit of 8 * 0.80 or $640 for a total percentage increase of 50%. Am I
> missing something?
>
> dave
>
__________________________________________________
Do You Yahoo!?
Get personalized email addresses from Yahoo! Mail
http://personal.mail.yahoo.com/
To unsubscribe from this group, send an email to:
realtraders-unsubscribe@xxxxxxxxxxxxxxx
Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
|