How do you estimate future option price?

Ok say you're looking at buying a put option for your stock with a strike price of $40 and the current cost is $3.00.

So that means if you bought that put option, it would cost you $300 (option price * 100).

Is there a way to know how much that option would be worth if price droped to 45? Or 40? Or 38? Etc.?

In other words, say you're trying to figure out how many options you may need to offset possible losses at certain stock prices, you need to know what the option will be worth when the stock falls to a certain price. How do you do this?

 

Start by reading some basic options textbooks maybe?

 

holy crap that was a helpful answer. I nominate you for ET member of the year.

I also would have accepted this:

http://lmgtfy.com/?q=how+to+determine+future+options+price

 

http://en.wikipedia.org/wiki/Black_scholes

 

Is there a software that will do that for me?

Like I enter the stock, strike price, current price, and then it tells me what the option will be worth at a certain point in time?

I know that the value of the option is somewhat dependent upon time, so maybe like a chart that shows "here's what it will be worth at x stock price from here until expiration" or something?

 

There are option calculators all over the web (link to one below). Software as well. Some brokerage firms provide them as well.

http://www.cboe.com/framed/IVolfram...ADING_TOOLS&title=CBOE - IVolatility Services

 

Me, me, me!! I know! Start by looking at Excel, maybe?

I knew you'd like it, sire .

 

I think you will find that puts are VERY EXPENSIVE insurance and not worth it.

 

Why's that?

 

What stock do you have in mind? Then we can crunch the numbers.