Anthologic
Amicus
"Lord of all Reality"
Ha!
Posts: 1,237
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Post by Anthologic on Mar 4, 2008 16:56:51 GMT -5
Okay, here's the scoop;
I bought NRG options for Mar 22 @ 45.00, for 0.40 when there was a huge spike of bullish call activity. This was Feb 12, when NRG was worth about 39.8.
The options have gone up to 0.85, and now are back down to 0.30.
Today they announced a 17 cent dividend and obviously the stock made a bullish run. It's interesting because once the option becomes an in-the-money call, it's immediately .17 richer because the dividend affects it.
I think this would be a good educational play for myself, since I've not owned any options prior to a dividend being announced.
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Post by Emperor AAdmin on Mar 4, 2008 17:23:55 GMT -5
Also keep in mind that the price of an option is affected by several factors such as (Implied) Volatility, Stock Price, Days until exp. and Interest Rate and the more close you approach the expiration date the more time decay will affect your option price (ameritrade has a nice analytical tool for just that).
Lets take your option into account (assuming it is a call we are talking about). Assuming Volatility (now IV=31) remains the same(unlikely), Stock Price (now=$42.39) remains the same (unlikely) and Interest Rate (now=5.11) remains the same. Thus we only have Days until exp. changing (to show is the impact of time decay on your option price).
Days until exp............price(=Theo. Value) 18(now).....................0.34 15..............................0.27 10..............................0.14 05..............................0.03 03..............................0.01 01..............................0.00
In other words with everything taken into account (and resuming as it is now) your call opinion will become worthless in 18 days unless there is a major price spike and or volatility spike.
Now, lets assume some changes occurred in price and volatility over the same time frame
Days until exp............price(=Theo. Value) *only IV changing to 50...........................changing to 100 18(now).....................0.93.......................4.03 15..............................0.78.......................3.68 10..............................0.51......................3.00 05..............................0.21......................2.12 03..............................0.09......................1.64 01..............................0.00.......................0.94
Days until exp............price(=Theo. Value) *only stock price changing to 45..............changing to 47.5 18(now).....................1.29.......................2.98 15..............................1.17.......................2.89 10..............................0.95.......................2.73 05..............................0.67.......................2.58 03..............................0.51.......................2.53 01..............................0.29.......................2.51
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Post by Emperor AAdmin on Mar 4, 2008 17:26:47 GMT -5
one minute to analyze your stock movement -------
Financials: Strong Risk: Low Institutions: Heavily Involved (BIG +) Movement: Approaching Short Term Top but still some (rather limited) space for upside Implied Volatility: Mainly below average and close to 52 Week low (=Stock/UP) Tech. Analysis: Approaching Temporary Top Chart Analysis: No specific pattern detected * Chart seems to be approaching a temp.top (= stock becoming expensive)
Conclusion: Stock is a very good bullish pick (Bravo) but keep in mind that it is approaching a temporary top and perhaps buying it cheaper later (say 1/2 weeks from now) is something to consider.
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Anthologic
Amicus
"Lord of all Reality"
Ha!
Posts: 1,237
|
Post by Anthologic on Mar 4, 2008 21:37:07 GMT -5
which tools did you use for the analysis?
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Post by Emperor AAdmin on Mar 4, 2008 23:28:55 GMT -5
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Post by Emperor AAdmin on Mar 4, 2008 23:42:30 GMT -5
All the sites here are free (even Ameritrade, Etrade, Optionxpress and Thinkorswim where you can register your account and select an option to send a check later (something your don't ever have to do later) which allows you to use their sites) .
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How did I know the price changes above?
Ameritrade.com >> Research >> options >> analytical("Chain type")
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What links are associated with my above analysis?
Financials: (5)+(7)+(9)+(11)+(20)+(26) Risk: (2)+(3)+(5)+(7)+(9)+(11)+(13)+(20)+(24) Institutions: (7)+(18) Movement: (1)+(2)+(3)+(4)+(11)+(14)+(15)+(16)+(19)+(22)+(23)+(24)+(25) Implied Volatility: (6)+(7)+(21)+(23) Tech. Analysis: (6)+(8)+(15)+(16)+(23) Chart Analysis: (6)+(8)+(14)+(15)+(23)
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