I'm trying to learn some basic arbitrage and I'm reading about tons of different strategies, but it looks as though option premiums are often less than $0.10.
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2 Answers
Look for options with distant expiration dates and volatile underlying stocks.
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Fantastic. Are there option charts for various strike prices like stock charts?– ShamoonCommented Jun 9, 2011 at 18:33
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Options are priced pretty close to the Black–Scholes model. The key factors are the current stock price, strike price, time to expiration, the risk-free rate of return, and most important, the stock volatility. I say the volatility is most important as all other variables are pretty static, the thing differentiating two $50 stocks is volatility.
Not knowing your actual goal, I'm not sure what else to offer. As James stated, the premium will rise for options that have longer til expiration.
answered Jun 9, 2011 at 20:14
JTP - Apologise to Monica♦JTP - Apologise to Monica
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This is interesting. I posted a related question here: money.stackexchange.com/questions/8898/…– ShaneCommented Jun 10, 2011 at 12:50