Comparing
Stock Options

 Stock Options

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Make More Money by Comparing Stock Options
Writers of stock options receive a premium when selling a stock option.  This premium is theirs to keep regardless of what the stock or option does.  Premium yield for put stock options is obtained by dividing "bid" option premium by option strike price.  Premium yield for call stock options is obtained by dividing "bid" option premium by stock price.

There are different terms for price of stock options:

  • Bid price (amount exchange pays you when you sell)
  • Ask price (amount you pay exchange when you buy)

The closing price can either be a buy or sell, and is what most quote services quote as "price."

Put stock options fall into one of these categories:

  • (ITM) In-the-money (stock price lower than stock option strike)
  • (ATM) At-the-money (stock & stock option strike same price)
  • (OTM) Out-of-the-money (stock price higher than stock option strike)

Call stock options fall into one of these categories:

  • (OTM) Out-of-the-money (stock price lower than stock option strike)
  • (ATM) At-the-money (stock & stock option strike same price)
  • (ITM) In-the-money (stock price higher than stock option strike)

We calculate and consider the following while compiling your stock option report:

  • If an ITM stock option is exercised, intrinsic value in the stock option premium is "given back."  This amount appears in the stock option premium but is not really a true premium.  Intrinsic value must be subtracted from ITM stock option premiums when ITM stock option premium yield is compared with OTM stock option premium yield (pure premium yield).
     
  • The top yield can come from either near or future-month stock options.  We compare premium yield on stock options for different expiration months.  Pure premium yield is divided by the days until the stock option expires (pure daily premium yield). 

These questions then arise:

  • How can I do calculations, on more than 50,000 stock option combinations, in a timely manner?
  • How do I analyze so many stock options to locate stock for writing an option?
  • How do I research stock underlying the stock option so I can avoid costly mistakes?

Let us do the complex calculations to narrow the field.  Then, make your selections from a "short list" of the best stock options.  We provide information for each prospect.  With the introduction of the Web, investment and research opportunities that were once only available to analysts are now available to the public.

Stock Options Tutorial   Covered Calls Tutorial   Covered Puts Tutorial

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