Price neutral betwen 2 diffeent stocks

Discussion in 'Options' started by Brennen81, Apr 28, 2014.

  1. Hello. I am hoping someone could help me with the math for the scenario proposed.

    I would like to Long CELG and Short C, evenly, with options. What I am tying to figure out is how to have them react in the same way. For example. Lets say I thought they were going in their respective way by 10%. CELG up and C down. The direct stock purchase/short way is pretty simple, buy and short the same $ worth of each stock. Now with options it's more difficult. These are the possibilities I am thinking. Starting with delta neutral. (Numbers are as of close today)

    CELG - $142.60......C - $47.30

    CELG May 23 142 Call....$5.35 (Bid).......0.537 Delta
    C May 23 47.5 Put........$1.03 (Bid)......-0.525 Delta

    Would either of the following make sense:

    1) Purchase 3 C puts because CELG stock is about 3 times the price of C
    2) Purchase 5 C Puts because the CELG Call is about 5 times the price of the C Put


    Maybe I am way off from the beginning. But if anyone has any more experienced thoughts, I would love to hear.

    Thanks
    Brandon