(redirected from Option Prices)

The price one pays to buy an option contract, whether it is a call or a put, when one is the first buyer. That is, when the option is written, its first buyer pays the option premium. It should not be confused it with the strike price, which is the price one would pay for the underlying asset, should the option be exercised.

When you buy an option, you pay the seller a nonrefundable amount, known as the option premium, for the right to exercise that option before it expires.

If you sell an option, you receive a premium from the buyer. In fact, collecting the premium is often one motive for selling options, including those you anticipate will expire without being exercised.

An option premium is not a fixed amount, and typically increases as the option moves in-the-money and decreases if it doesn't move in-the-money.

However, factors such as the price and volatility of the underlying instrument, current interest rates, and the amount of time left before the option expires also affect the premium price.

You can look at the current range of premium prices in the Options Quotations tables in newspapers or on options websites, such as the Options Clearing Corporation (OCC) website.

References in periodicals archive ?
The use of Black-Scholes equations in the reduction of banking errors in the computation of fair option prices is also analyzed.
The IRS argues that T singly (or she and H jointly) did not own enough T Steel stock to change the option prices from the 1951 buy-sell agreement.
The value of the stock was based on the option price at which T and H could sell the stock; the prices had been set in 1976.
Option prices quoted in the newspapers have to be multiplied by 100 because each option represents 100 shares.
This change in sentiment, from worthless to valuable, powered the option price higher and put profits in the pockets of option traders.
Mar 2000 - - - (One unit: 300-Index times 10,000) TOPIX Option Closing Prices on Tokyo Stock Exchange Standard Option Prices (Points) Prices (Points) (Mar) UP/DN (Apr) UP/DN Put 1,150 11.
Option Prices (Yen) Prices (Yen) (Mar) UP/DN (Apr) UP/DN Put 14,500 20 DN 50 250 DN 110 15,000 120 DN 170 440 DN 150 15,500 530 DN 30 770 DN 130 Call 14,500 605 UP 255 760 UP 185 15,000 190 UP 115 460 UP 145 15,500 35 UP 25 235 UP 85 Volume: Put 26,422
More than 15 reviewed research papers will be presented on topics such as the information content of option prices, option and equity investment strategies, and empirical characteristics of option volatility.
Today, we're going to make this lesson even more tangible by analyzing the option prices on a cluster of credit card concerns, including American Express, MasterCard, and Visa.
Prior to his time with Relativity, he worked for Alpha Trading as a quantitative analyst, where he was credited with co-authoring a computerized stock option arbitrage system which monitored 30,000 option prices simultaneously and automatically placed orders in real-time.
The relationship between volatility and option prices and the various methods used to estimate volatility are also explored.
Implied Volatility Skews and Stock Index Skewness and Kurtosis implied by S&P 500 Index Option Prices

Site: Follow: Share:
Open / Close