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Monday, March 16, 2009

Change In Measuring Upside

I just wanted to make a note here, that the way that upside has been presented in the posts thus far was based on the stock price at which the initial position was created. However, it is my opinion that in fact the potential upside should be measured as a percentage of the original stock price minus the option sale price, as this was actually the original investment. In order to calculate the potential upside, you would then do the following:

(Strike Price - (Stock Price-Option Price))/(Stock Price - Option Price)

I would be interested to know if anyone else has an opinion on this topic.

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