# Calculate At-The-Money (options and futures)

When it comes to a stock price of \$288 and there are only 3 strike prices \$280, \$300, \$320. What would be the at-the-money. The values are as follows: K Call Put OCT JAN APR OCT JAN APR 280 23 33 43 10 15 \$ 27 300 8 23 31 19 32 \$ 37 320 4 15 21 45 53 \$ 55 What would be In, Out and At

The \$288 would be ATM. Alas, they aren’t trading it. The \$280 call is ITM and the \$300 call is OTM. When you model your vol surface, your \$288 has the lowest implied vol and it is just too bad it isn’t traded. (For the right money, it is traded of course).

None are at the money. You’d need a strike of \$288 for that. \$300 and \$320 are out of the money as calls, in the money as puts \$280 is in the money as a call, out of the money as a put.

So, \$320 is OTM?

And I can post the phone numbers of some people in equity derivatives at a few banks who would be delighted to write you an ATM put/call as long as the size is big enough.

Joey, I think the one with \$330 strike price should have the lowest IV. The Hull book says equity options have volatility skew, so the higher the strike price the lower the IV.

Yep - you’re probably right about that. I’m living in a commodities world right now where it’s all smiles no skews.

Thanks for your help. Has anyone remembered taking Futures and Options in College? If so, how was it.

You Sell the Stock Short does this equals a Sell Short a Call or Put?

sell stock short is long a put short a call.

Here is the example for more elaboration: Using the data given (in my first post on top) Suppose that on SEPT 1 you sell the stock short and at the same time you long the APR 300 Call. 1) calculate ICF? 2) Stock price = 350, Calculate ICF? I can’t grasp the sell stock short.

ICF?

initial cash flow = ICF

Thank you for your help. That really cleared it up. what about continuously compounded and you want to find annual, quarterly, monthly and daily? If the interest is continuously is 10%

you just use future value compounding formula FV = (1 + i/n)^(n*t) for n period compounding FV = e^(i*t) for continous compounding If the value of interest payment is know and its continuously compounded, you can can find the interest rate, using second formula, and then plug that interest rate into first formula, select your periods (annual, quarterly, monthly, etc) and calculate interest payment compounded the way you need it.

so is this a homework problem?

JoeyDVivre Wrote: ------------------------------------------------------- > so is this a homework problem? Seems that way. What would prof. Joey do if he knew one of his students was cheating?

oh boy. I busted 'em. I hate cheating.

Not cheating, just want clarification on some option definition.