Percent to Double

Discussion in 'Options' started by GatsbyGirl, Apr 23, 2006.

  1. Where can I find or how can I manually calculate the % to double on an option?
  2. You would always have to re-calculate since IV and time to expiry changes.

    You could just look at the option chain and do a quick calculation in you head to figure out the % move required to double the option.
  3. white17


  4. OK so I stink at figuring this stuff out. Can you help me figure one with the following example?

    Stock: AUY
    Current: 10.70

    May 7.50 CALL
    Ask: 3.40
    Spread: .30
    Delta: .97
    Intrinsic: 3.20
    Time: .20
    IV: 88.84
  5. If all other factors being equal, if the stock was trading at roughly $11.65 your option would double in value. don't ask me how to calculate, i eyeballed from my profit & loss graph from the thinkorswim platform.
  6. hopback


    % to double is a bs figure invented by one of those news letterguys that has no relevance in that it does not take in to account any other factors that effect an options price.

    It's a useless number IMO but here it is

    (1/delta)/stock price

    (1/.97)/10.70=0.096348 or 9.63%

    target stock price
    (% to double + 1) X stock price
  7. Thanks Hop.
  8. It's a lot faster to use some software pricing model. That way you can adjust for iv and time decay also and play around with the different scenarios/greeks.
    Daddy's boy
  9. MTE


    I don't know the exact definition of % to double, cause I think it's useless, but how in the world would a $3.4 option with a delta of 0.97 double in value if the stock moves up by $1!?

    I.e. we have an option price $3.4
    Delta 0.97
    stock @ 10.70.

    10.70 to 11.70 is $1*0.97=$0.97. $0.97+3.4=4.37. Doesn't look like a double to me.:confused:
  10. sle


    Ahm. You have delta, you have gamma, you have original price. From Taylor expansion, you can describe the change in option value as

    Change = UndChange * Delta + .5 * Gamma * UndChange^2

    So, solving a quadratic equation (3rd grade, i recon), we get

    Double Change = [ -Delta +/- Sqrt(Delta^2 - 2 * Gamma * CurrentOptPx) ] / Gamma
    #10     Apr 24, 2006