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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe) -- Ignore unavailable to you. Want to Upgrade?

To: ---------- who wrote (859)	5/30/1998 4:20:00 AM
From: B4TheBell	Read Replies (2) \| Respond to of 2241

Doug and Steve, I'm assuming Steve is referring to theoretical value. This is the output when the known variables such as stock price, strike price, time to expiration, volatility, interest rate, and dividend rate are input into an option pricing model such as the Black-Scholes model. Basically, theoretical value (also called fair value) is what option should be priced at using those variables. It gives you an indication if options are fairly priced. For example, if the theoretical value shows 2 1/4 but option is trading in the market at 2 7/16, this tells you the option is overpriced relative to the theoretical value and may be due to higher implied volatility. A site I use for weekend research is the Philadelphia Stock Exchange. Their option chain has ability to show theoretical value as well as delta, gamma, theta and vega values. A caveat: it appears that stock price is rounded to nearest whole point. I'm not sure if the rounded figure is used to come up with the option values. The bid/ask can be easily checked against another quote site such as CBOE. Anyway, check out the site... fast.quote.com Hope this helps... B4