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# How to figure out the underlying cost with option?

Discussion in 'Options' started by quietstorm, Sep 8, 2002.

1. ### quietstorm

This person was able to figure out the cost of his option. Here is what he wrote about a particular September QQQ put option:

"the current price for qqq is at 22.09. The option is at 1.05 so you are really paying 23.14 for the price of the underlying QQQ. This is too expensive consider the short amount of time before expiration"

My question is how did he figure out that the QQQ price is 23.14 from that option price of 1.05. Thank you so much.

2. ### nugya

Hi there,

Alhough you have not mentioned which option are we talking about here, but i think it is Sept 22 CALL.

So which means that he is adding 22.09+1.05=23.14

You are paying 0.09 for the instint value and 0.99 for the time value.There are several pricing models which calculates the value of a option(most popular one is Black Scholes)From these pricing models you can judge whether you are paying too much or too little for a option

3. ### metooxx

You need to read up on option basics before you ever touch one to trade ...

4. ### stock777

And then use asbestos gloves.

5. ### AAAintheBeltway

well, he is wrong about what you are paying. If the strike price of the option is 22, you would be paying 23.05. You would pay 1.05 for the right to buy it at 22.

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