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Help with Calculation on trades please.....
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Help with Calculation on trades please.....

  #1 (permalink)
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Help with Calculation on trades please.....

Listed below are examples of regular Long Put and Call trades
What I am having trouble ' Understanding " is..... How are these calculated/ and how could I as a Trader, know that if GM stock moved down by 9.42% that the $32 Put that I bought would Net me a profit of 100% ?
Is there a certain Options Calculator that I can plug in the numbers, that will tell me exactally how much in price that GM will have to move in order for my $32 Put to give me a 100% return ?

Here are the EXAMPLES.....

A 9.42% move down in GM from $36.21 to $32.80 got us 100% in GM September 32 puts
A 3.87% move down in PM from $78.31 to $75.28 got us 94.1% in PM March 75 puts
A 5.16% move down in MGM from $25.57 to $24.25 got us 50% in MGM September 25 puts overnight
A 3.4% move down in CAT from $86.26 to $83.30 got us 83% in CAT June 82.50 puts

A 5.8% move in IMAX from $25.33 to $26.81 got us 116% in IMAX September 28 calls
A 7.9% move in ARUN from$19.09 to $20.61 got us 54% in ARUN February 21 calls overnight
A 5.3% move in FTNT from $22.63 to $23.84 got us 77% in FTNT July 24 calls
A 6.6% move in RMBS from $13.78 to $14.70 got us 100% in RMBS August 15 calls


Here is an EXAMPLE from the same article that the above trades were listed in......

I recommended that my readers purchase the ARUN February 21 calls (ARUN140222C00021000). We entered the calls on Jan. 14 at $0.55, or $55 per contract, when ARUN common stock was trading at the $19 level.

The very next day, the stock shot up almost 6%, at which point I alerted my readers to close one third of the position at $0.85 for an overnight profit of 55%. We could have closed the entire position and

Thanks for the help,
I just want to be able to "Know" that , when ever I buy a Long Call or Put , that if the stock moves X amount of dollars , that I can expect a near 100% return , 50% , 150%, etc....

My thinking is,
if I expect a $50 stock to move 5% = $2.50 ,
I want to be able to know what ROI that move in the stock will return to me via the Option that I buy.
So..... If all I want to try and get is a 100% return, and a move lesser than $2.50 on the $50 stock will give me that 100% return, this would then change the strike that I would look to buy

Thanks so much, Always appreciate this Forums help - Michael

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  #2 (permalink)
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  #3 (permalink)
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There are a bunch of option calculator online, easy to find, but you'll need to know the volatily and the days until expiration to calculate somthing. There are also some free Excel spreadsheet available online (this one http://www.optiontradingtips.com/resources/OptionTradingWorkbook.xls is fine).
If your volatity is accurate then it will give you a good theoritical price for the option. Keep in mind it's theoritical, in real life the bid/ask spread with a light volume traded underlying instruments can be huge.

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  #4 (permalink)
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Thank you

Sam, i appreciate the Excel spreadsheet
Much appreciated

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  #5 (permalink)
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mdsvtr View Post
Listed below are examples of regular Long Put and Call trades
What I am having trouble ' Understanding " is..... How are these calculated/ and how could I as a Trader, know that if GM stock moved down by 9.42% that the $32 Put that I bought would Net me a profit of 100% ?
Is there a certain Options Calculator that I can plug in the numbers, that will tell me exactally how much in price that GM will have to move in order for my $32 Put to give me a 100% return ?

Here are the EXAMPLES.....

A 9.42% move down in GM from $36.21 to $32.80 got us 100% in GM September 32 puts
A 3.87% move down in PM from $78.31 to $75.28 got us 94.1% in PM March 75 puts
A 5.16% move down in MGM from $25.57 to $24.25 got us 50% in MGM September 25 puts overnight
A 3.4% move down in CAT from $86.26 to $83.30 got us 83% in CAT June 82.50 puts

A 5.8% move in IMAX from $25.33 to $26.81 got us 116% in IMAX September 28 calls
A 7.9% move in ARUN from$19.09 to $20.61 got us 54% in ARUN February 21 calls overnight
A 5.3% move in FTNT from $22.63 to $23.84 got us 77% in FTNT July 24 calls
A 6.6% move in RMBS from $13.78 to $14.70 got us 100% in RMBS August 15 calls


Here is an EXAMPLE from the same article that the above trades were listed in......

I recommended that my readers purchase the ARUN February 21 calls (ARUN140222C00021000). We entered the calls on Jan. 14 at $0.55, or $55 per contract, when ARUN common stock was trading at the $19 level.

The very next day, the stock shot up almost 6%, at which point I alerted my readers to close one third of the position at $0.85 for an overnight profit of 55%. We could have closed the entire position and

Thanks for the help,
I just want to be able to "Know" that , when ever I buy a Long Call or Put , that if the stock moves X amount of dollars , that I can expect a near 100% return , 50% , 150%, etc....

My thinking is,
if I expect a $50 stock to move 5% = $2.50 ,
I want to be able to know what ROI that move in the stock will return to me via the Option that I buy.
So..... If all I want to try and get is a 100% return, and a move lesser than $2.50 on the $50 stock will give me that 100% return, this would then change the strike that I would look to buy

Thanks so much, Always appreciate this Forums help - Michael

There is no way to know the exact effect a 9.42% drop in underlying price will have on current option prices. The best you can do is look at the Deltas of the strike for that moment. The Delta is a value given to describe what a 1$ move in the underlying will do to the option price. Example...an option strike at .30 Deltas means that a 1$ move in the underlying will move the option price by.30. But then you have Gamma...which is a value used to describe the rate of change to the Deltas by a move in the underlying. Which means the Deltas will change as the price changes or time to expiration or volatility......So if the Gamma is high (as it is in the last 5-7 days before expiration where there is little Theta left) the Delta can change rapidly with any move in stock price.

The effects of a move in stock price on options are unpredictable as you don't know what it will do to volatility...and the further forward you are trying to look the less predictable it becomes.

The best you can do is look at the Deltas for that moment in time. And be familiar with how Gamma plays a role.

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  #6 (permalink)
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You allready got some answers that are pointing in the right direction but I am going to try to add some more hints.

Your example:

A 9.42% move down in GM from $36.21 to $32.80 got us 100% in GM September 32 puts

You miss some key information. I understand from your posting that you are reading someone's results and he is telling you that he achieved this return.

What you miss is time. The time you are in the trade AND at wich time you are in the trade.

It makes a big difference if you get in the trade on januari 1st and get out on januari 3rd or that you get in the trade on januari 1st and get out on september 15th

If the price drop happens on januari 2nd, your options might be up 100% on januari 3rd but if you wait untill september 15th you actualy might be at a loss again.

So if you put all this into an option calculator, you will have to fill in the date that you buy an option, the date that you expect to sell an option and from there you can calculate what price drop is needed to achieve the desired % result.

For options everything changes every day like ACstudio allready explained. Therefore a big factor in your prediction will be time, because every day all the values are different. The longer the time you are expecting to be in a position, the more difficult it will be to predict.

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  #7 (permalink)
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Futures Experience: Beginner
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Broker/Data: Insta
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Posts: 7 since Nov 2014
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Re Help with Calculation on trades please

Here i get too many technique how to calculate trades. thank you very much guy`s who post on this thread

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