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On an Out of the money option, does the price of the stock have to exceed the strike price option that you purchased , for you to make an money at all or do you still make money, even if it doesn't exceed your strike price, but it's close to it, come Expiration? EXAMPLE : XOM is trading at $96.68 and the current date is December 21st. The JAN $100 call option is going for .93 cents with 2,000 volume , 43,000 O.I. and a Delta of .36. The Bid x Ask is .89 x .93 So........ My Breakeven price on this trade would be $100.93 , which is roughly a 2.5% move in the underlying stock price. MY QUESTION IS THIS ..... what if come Expiration time , the stock is at $100 , does this mean I'd loose everything on the trade? Now, what if come Expiration time, the underlying stock is trading at $102 ( Do I make more money on the trade, the higher above $100.93 that the stock is trading at come Expiration ? Or is it a set / pre-determined Profit/Loss going into an Option trade?
Can you help answer these questions from other members on NexusFi?
-On your Option trade of buying the 100 Call you will make money as the Underlying moves toward the Strike as long as it moves at a decent rate compared to the time left.
-and Yes you will lose All your money on the 100 Call by Expiration if the Underlying does not exceed your Breakeven Calculation you mentioned.....But you can Sell this Option before Expiration.
-and Yes you will make more money above your Breakeven the Further the Underlying moves above that Point until Expiration of the Option.
