Question

What is the price of a put premium vs. a call option premium if they have the same strike price and same expiration on the same stock? Is one typically more expensive than the other?

Answer 1

Solution:-

Option Premium

An option premium is the current market price of an option contract.it is thus the income recieved by the seller of an option contract to another party.In the money option premium are composed of two factors.Intrinsic and Extrinsic value.out of the money option premium consists solely on extrinsic value.Premium are quoted on a per share basis becuase most option contracts represent 100 shares of the undelying stock.Thus,a premium that is quoted as $0.10 means that the option contract will cost $ 10.

As the underlying security prices increases ,the premium of a call option will increases,but the premium of a put option decreases.As the underlying security prices decreases ,the premium of a put option increases,and the opposit is true for call option.

for allmost ever stock whose option trade on exchange put option is higher price than call option.To calrify,when comparing option whose strike price are equally far out of the money ,the put carry higher price than calls.They also have higher delta.The delta measures the risk in terms of the options exposures to price changes in its underlying stock.