Options

Discussion in 'Stocks & Derivatives' started by mickjohn, Jan 23, 2011.

  1. mickjohn

    mickjohn New Member

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    Quick one on Options.......

    Company A has listed shares and options available with an expiry date for options well into the future.

    Should the price per option be roughly the same as the Share Price minus the excercise price?

    eg. Stock with SP at $2
    option excercise price 20c
    Therefore should the options be worth around 1.80ea?

    If the options listed are cheaper than 1.80, say 1.60ea. Why would this be? Are there additional costs involved in transferring options into ordinary shares?
    Again, expiration isnt for quite some time.
     
  2. THUCYDIDES79

    THUCYDIDES79 New Member Silver Stacker

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    If current SP is $2 and your exercise price for lets say a CALL option ( rite to buy ) is $0.20 than the
    call option price would be AT LEAST $1.80.

    If it were $1.70 , than you would buy the options for $1.70 and exercise them immidately by buying the
    Shares for $0.20, and than those shares you would immidately sell for $2.00 on the open market, which would
    net you around $0.10 per share ( excluding commissions ).

    So depending on the Volatility of particular stock, Duration of the options ( 1 month, 3 months, 1 year, etc ) and current interest rates. the premium could be calculated.
     

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