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Pittsburg, Kansas | I can't give you an answer, but can tell you how I approached it from the other direction.
Many calls and puts expire worthless. Really smart people price them and I am not really smart.
I'm also terrible at knowing when to sell. So many years ago (have not done this since before 2000) when I had a stock I struggled with the question of when to sell it, I would instead of selling "write" a covered call. In other words I would give someone else the opportunity to own my shares at a certain strike price and get to collect the premium they were willing to pay no matter what happened. There were a few stocks I did this with more than once and created income while still owning the stock.
The danger of this is at least two fold. If you really wanted to sell the stock and it never hits its call price, you are still stuck with the stock if the market tanks. On the other hand if the stock price shoots the moon you are stopped out and lose ownership of a rising stock.
I only did it with stocks I had good gains and couldn't decide if or when to sell.
How did I come up with the right price to write the covered call? I'm just a dumb damn dirt farmer. I didn't. I "hoped" those really smart guys in the market were doing their job. And if it seemed like a decent amount of cash to take for waiting a month or two I would just do it. Real scientific and intelligent, right? LOL
I did that for a year or two, on and off.
The ones generally making the money are the ones writing the puts and calls, not the ones buying them. But you better be really smart and have big balls in that game. That is one reason why brokerages want margin accounts. So they can loan out your shares so the guys with big balls can write covered calls and puts. Supposed to be not kosher to write naked options but I question how strict that rule is followed.
Just rantings from an old guy.
Erase in your mind everything you just read.
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stocks, at what ratio or point do you buy the stock and not a call option?
