36 lines
1.1 KiB
Plaintext
36 lines
1.1 KiB
Plaintext
54 • The Intelligent Option Investor
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Strike Price Strike–Stock Price Ratio Call Price
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Call Price as a Percent
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of Stock Price
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70 140% $0.25 0.5
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60 120% $1.15 2.3
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50 100% $4.15 8.3
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Notice that each time we lowered the strike price in successive
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examples, we lowered the ratio of the strike price to the stock price. This
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relationship (sometimes abbreviated as K/S, where K stands for strike price
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and S stands for stock price) and the change in option prices associated
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with it are easy for stock investors to understand because of the obvious tie
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to directionality. This is precisely the reason why we have used changes in
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the strike–stock price ratio as a vehicle to explain option pricing. There are
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other variables that can cause option prices to change, and we will discuss
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these in a later section.
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I will not make such a long-winded explanation, but, of course,
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put options are priced in just the same way. In other words, this put
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option,
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5/18/2012
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-
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10
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20
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30
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40
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50
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60
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70
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80
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90
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100
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5/20/2013 249 499 749 999
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Advanced Building Corp. (ABC)
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Date/Day Count
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Stock Price
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GREEN |