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Results tagged with Search options user 64920

This tag is to be used for any question on call-options. i.e. an agreement or right to buy a stock or commodity at a specific price. Related tags [put-options, options, options-assignment, option-exercise] should be used when appropriate.

1
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The ratio you are interested in is closely related to implied volatility (IV). The price to (at-the-money) premium ratio is approximately 251*sqrt(365/T)/IV, where T is days to expiration and IV is in …
answered yesterday by nanoman
2
votes
Option pricing is based on modeling the stock price as a random walk, not a "return to the mean". According to the efficient market hypothesis, it is never "clear" that a stock is "about to rebound" o …
answered Jun 27 '18 by nanoman
58
votes
Out-of-the-money options close to expiration often have no bids. If no one is willing to pay even $0.01 for them, you will have to let them expire worthless. Your loss essentially already happened whe …
answered Aug 10 '18 by nanoman
4
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Options allow placing bets to hedge or speculate on nonlinear risks. They can be viewed as a type of insurance market. For example, protective puts are useful because preventing the possibility of lar …
answered Mar 22 by nanoman
2
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You are correct that the option is massively overpriced. In particular, there are lower-strike March weekly calls that cost less, and therefore would always be preferable in any strategy. The fair val …
answered Mar 28 by nanoman
1
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Bob Baerker's answer is good. But to start with something even more basic: Your confusion may be starting when you write, "Say I call a stock". You may be thinking of an option as an order type. Rathe …
answered Mar 5 by nanoman