Re: Beta for Stock Options?
Thanks, saluki that's helpful as now I know a little more where to look.
But isn't the delta non-linear based on where the stock price is relative to the strike price? I.e. If I buy an option when the price is $50, the strike is $60, the duration is 1.5 years and the volatility is .2 and the assumed interest rate is 5%, then the calculators tell me delta is about .4. Then delta keeps going higher as you get in the money, right since it's more of a direct correlation then?
I think what I am really trying to determine is what my return would have been if on May 21st last year I bought a call option on the DJIA which was trading at 11,125 with a strike price of 12,437 with an expiration of Dec-07. (Our average option purchase was 11.8% out of the money and had an expiration of Jan-08).
I see that DJIA options trade under DJX. So, a Dec-07 option (closest to Jan-08) with a 125 strike is worth 14.30/14.60 today. It appears that option (DJWLU) only trades sporadically. An option today that is similarly out of the money (current price $135 strike $151) with a similar duration (Dec-08) costs about $4.85. Is that a valid comparison data point? From the historical DJWLU data it seems like it.
If so, it would seem we woefully underperformed which was kind of my gut feeling about a 70% return on a 22% underlying increase.
I'm just trying to figure out if I'm thinking about this the right way, so any other input is welcome. Thanks.