54  •   The Intelligent Option Investor
Strike Price Strike–Stock Price Ratio Call Price
Call Price as a Percent 
of Stock Price
70 140% $0.25 0.5
60 120% $1.15 2.3
50 100% $4.15 8.3
Notice that each time we lowered the strike price in successive 
examples, we lowered the ratio of the strike price to the stock price. This 
relationship (sometimes abbreviated as K/S, where K stands for strike price 
and S stands for stock price) and the change in option prices associated 
with it are easy for stock investors to understand because of the obvious tie 
to directionality. This is precisely the reason why we have used changes in 
the strike–stock price ratio as a vehicle to explain option pricing. There are 
other variables that can cause option prices to change, and we will discuss 
these in a later section.
I will not make such a long-winded explanation, but, of course, 
put options are priced in just the same way. In other words, this put 
option,
5/18/2012
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5/20/2013 249 499 749 999
Advanced Building Corp. (ABC)
Date/Day Count
Stock Price
GREEN