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Alphabet Inc. Message Board

  • yourwhiteknight yourwhiteknight Nov 18, 2004 2:50 PM Flag

    Option Question

    I am holding 200 Options for 06 $50.00 PUTS.
    Paid .90 and was wondering what these would be worth (approx) if GOOG hits 130-140.
    Do not want to get greedy and the current 1.45 may be enough to jump ship today.


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    • what about pin risk?

    • I'd love to be a fly on the wall and see how you trade.

    • Actually, let's take the example that I'm long, and want to exit (my target has been met and things, but things start to go south). I want to get out and can't get access to my account at the broker (for whatever reason).

      If I have another account at another broker that I can get access to, then I go SHORT. This would offset the loss being taken at the broker I can't get to.

      It has happened to me more than once. Trading ain't perfect, neither is technology. Make sure you have a plan to deal with these little issues.

      If you are serious about trading, you will have more than one system, more than one data feed from the market, more than one broker, and and alternative to internet access.

      I have 3 systems, 2 data feeds, 2 brokers, 3 intnernet access methods, as well as a live broker to speak with.

      I didn't always have that much backup, but I have learned that it is required.


    • Thats ok. I am sure it is the morning Coffee. That ususally winds me up. Hell if you are 32 I hate to admit I am old enough (not wiser mind you) to be your dad. Trust me I was cocky at your age also and you should be. It is the time of life to be aggressive in business and in life. I sish I would have had the balls to learn the stcok market at your age.

      I held my puts to long in Novemeber althoug I did get out. I bought the 165 puts when the stock hit 166 a few weeks ago. In the after market that day it was down to 160. I was fantasizing about all my riches and I'll be damned if the stock didn't stay at the 166-170 level and than have that pop into the 180's. I finally got out after averaging down but sill lost.

      This month has to be played better. I am wondering if this 167 range is not a support level or if that support will break down.

    • You can very easily calculate what the value would be by doing the following.

      Take a look at the current option table for Google. Take the current value of your Jan 06/50 PUTs which is about 1.40 per share (100 shares in a contract). Now if Google was to drop from $170 to $140, then your PUTs would be worth approximately what the option table says for Jan 06/80 PUTs (80 is calculated from the $30 drop in Google's price you estimate and then added to your strike price of 50). Jan 06/80 PUTs are going for $5.00 per share. The same can be done for your estimate of Google's share price at $130. You would look up on the option chart for Jan 06/90 PUTs ($170-$130 = $40, 50 + 40 = 90 PUTs) which would be $6.90 per share.

      Now this will not be exact because, when a stock price gains/falls there is also an increase/decrease in the option price. What I mean is this: right now Google is about $170, so 170 PUTs would be worth more than if Google was at $100 and you had 100 PUTs. An option price has many components to it (in/out of the money, volitility and market demand).

      My opinion is this however, because there are plenty more shares of Google coming out, the volitility of this stock is going to decrease a lot. The volitility of this stock was high before due to so few unlocked shares. When the volitility decreases, so will your option price. I wouldn't hold options with such a far out date on this stock: I think March's are plenty far.

      • 2 Replies to jeffreypauldouglas
      • That is a good way fo guaging the value of your options if you don't have na options simulator. It will give you a pretty close estimate.

        I also agree with your beleife about the volatility being reduced as more shares enter the float. I will play the Novemeber puts this month.

        We now know that the big three will be selling off 16.6 million shares in the next 18 months which will effect the volatitlity.
        The question is how many shares will be sold when. Will they dump a large percentage now and trickle the rest over this period or will they do it on an evenly spread basis or maybe do a little now and more later. No one knows for sure. We do know that as more shares enter the float the tighter the volatility.

        This will be an interesting week now that theis new information has been released.

      • Mr. Jeffrey, You do realize that as a stocks price falls the implied option volatility increases. If the price falls quickly the implied vol would increase dramaticly and further increase the options price. Another way to calculate the value is to use the vega of the option minus the theta. master opmn

    • You're getting greedy. You have a 50%+ return on your money & you're asking a question that no one can answer. We don't have a crytal ball. If GOOG went to $135 this coming week, obviously your options would appreciate significantly. That would be a 20% drop in GOOG share price.

      But your strike as you say is in 2006, The premium can be all over the place between now & then.

      Take your profits after MOnday, then trade them again when GOOG settle in another trend.

    • You do reliaze that if you have 2 accounts you can't close a position in one account and have it reflect the open position in the other account. You would be long in one account and short in the other. You make no sense.

    • That "spread" is actually called a strangle. I am surprised that there are no real experts in option volatility and pricing on this board. This is such an easy money earning stock to trade options on if done properly.

    • Do use an option trading site that shows you the greeks? I think all sites should. Check the theta (time decay) and vega (volatility) against the current implied volatility. What ever site you are using should also have a profit/loss chart. You sound like you are up your ass. I don't know many people who would spend $18,000.00 and not even know the risk/reward on an option trade. If you have that much money to burn then try to educate yourself and not ask stupid questions.

    • Naked puts and calls require 100K in your account. Again call and check for yourself.

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