Buying (Long) 1 Sep call 75.50 when the underlying instrument Sep crude futures @ 75.
Also, lets say, I paid a premium of 960$ .
Step 2:
Let’s assume after few hours after my entering into long position, underlying instrument (i.e. Sep crude futures is trading at 80).
So, I decided to get out of my long Sep call 75.50 position
Step 3:
How much will be my profit? Can you please breakdown numbers as simple as possible regarding how you calculated it?
Thanks.
Answer by the option profit .com
time will play a large part in determining the change in value of any options contract. the shorter the time period the more the option will fluctuate.
implied volatility will play another part. it determines the markets opinion on the amount the underlying will change in value.
one pretty simple way to check an expected change of an option contract is delta. this will show you how much the value of an option will change assuming the underlying changes. for example, if a contract has a delta of 1 it means the contract would change dollar for dollar in a move in the underlying.
i find delta as one of the easiest and relatively affective ways to help gauge an expected move in the value of your option when you see the underlining investment change.
unfortunately there is now definitive way to know what a profit would be. there could be an event that occurs impacting the movement of the underlying which would change all of the above unexpectedly.
this change could be unrelated to the underlying itself. for example the market could move sharply any given day and that would have an impact on the value of the option even if the underlying had no direct impact on the movement in the market. feel free to visit my site (my profile name) for more information on option trading.
as a retired options principal i know it is a great feeling when the homework you have done works as you expect it to…if not, luck never hurts.
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