Cost of a put option for Irish shares

Z

z106

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I am curious as to what price a put option would cost for,say,EUR100k worth of shares for a certain large irish financial institution.

Sorry I cannot give the name, butI am not allowed to name the institution on AAM.

But basically - it is one of teh very big ones that I am referring to.

Since teh price of a put option is based on teh volatility of a share,the large ones are fairly similar in that regard - so by me not supplying teh name of the institution shouldn't be toomuch of a hindrance.

As i say - I am only looking for a ballpark figure.

Like - for 12 months, would it be nearer EUR1,000 - or would it be nearer,say, EUR20,000 for example?
 
I thought that the charges for put and call options etc. were similar to whatever a stockbroker charged for normal share trades?
 
There are no listed options on Irish Financials.. some brokers will make you an OTC price but don't expect it to be very competitive.. If I was to guesstimate you would be looking at a 15 - 20% premium for a 12 month at the european put option
 
sorry.. above should say "at the money" european put i.e. if the price was EUR 10 today the strike price on the put would be the same..
 
ClubMan said:
I thought that the charges for put and call options etc. were similar to whatever a stockbroker charged for normal share trades?
Click to expand...

I think you're wrong - although I'm certainly no expert.

But the things that impact th eprice as far as i was aware were
a) the volatility of the underlying asset
b) the amount of time to go before the strike price.

That makes sense to me.
A put option is just insurance really - so the greater the volatility the greater the risk and therefoe the greater the premium.

And also - the length of time before the options expires would have to be an option too.
As - the shorter the time left to go the the expiry then the lower the risk.

Like- if i insured my house tomorrow against fire with teh contract to expire in 2 days time then I'm assuming teh premium would be very small.

Is my understanding of pricing re volatility and time correct here folks ?
 
There are 6 determinants to standard option pricing /option value

1. The underlying price
2. The exercise price
3. The time to expiration
4. The risk-free interest rate
5. The yield generated by the underlying asset.
6. The volatiltiy of the asset price
You can easily observe /obtain estimates for 1 - 5.. 6 is more subjective. If the option was exchange traded you can just derive the implied volatility from the option price itself but in an OTC market you have to estimate your own level for the volatility e.g.. you could use past annualised daily standard deviation in price.. so called "realised volatility". The option value is dependent on the interaction of all 6 factors and will display varying degrees of sensitivity to each throughout it's live dependingly mostly on the movement in the underlying asset price.
 
ClubMan said:
I thought that the charges for put and call options etc. were similar to whatever a stockbroker charged for normal share trades?
Click to expand...
Ahhh! the ambiguity of language. I presume Clubbie you are referring to things like commission i.e. the charges. OP was asking about prices which is a different thing.
 
Yes harchie - I was talking about charges and assumed that was what the original poster was asking about.
 
I know that we can't discuss individual shares but can an someone provide the info on what would be the cost of getting a put option for 100k of AIB shares to be exercised before 31/3/09.

I don't see any difference between this and say that it is a fact that AIB are 13.75 at the moment. This is a fact and the cost should be a fact(not a discussion)
 
sandymount said:
I know that we can't discuss individual shares but can an someone provide the info on what would be the cost of getting a put option for 100k of AIB shares to be exercised before 31/3/09.

I don't see any difference between this and say that it is a fact that AIB are 13.75 at the moment. This is a fact and the cost should be a fact(not a discussion)
Click to expand...
Bigred is probably thereabouts, I'd say about 15K for 1 year ATM puts and same for the call.
 
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