Options Question

[aquaswim47]

Why is the GOOG, TROW, and CAT call options valued higher despite declines in stock price of more than 5%? Thanks for any info you can provide.

Sell GOO IT 2007/09/22 call on GOOGLE INC A at $600.00 4 $2.40 $2.75 $1,100.00 14.58% $140.00
Sell JCP HO 2007/08/18 call on J.C. PENNEY CO INC at $75.00 2 $3.30 $2.65 $530.00 -19.70% -$130.00
Sell CAT KR 2007/11/17 call on CATERPILLAR INC at $90.00 4 $2.10 $2.75 $1,100.00 30.95% $260.00
Sell XOM VQ 2007/10/20 put on EXXON MOBIL CORP at $85.00 2 $1.45 $1.60 $320.00 10.34% $30.00
Sell COP HR 2007/08/18 call on CONOCOPHILLIPS at $90.00 8 $1.80 $1.55 $1,240.00 -13.89% -$200.00
Sell TEX JT 2007/10/20 call on TEREX CORP at $100.00 8 $4.70 $4.50 $3,600.00 -4.26% -$160.00
Sell XOM JS 2007/10/20 call on EXXON MOBIL CORP at $95.00 2 $3.30 $3.20 $640.00 -3.03% -$20.00
Sell APV VI 2007/10/20 put on APPLE INC at $145.00 4 $13.35 $12.40 $4,960.00 -7.12% -$380.00
Sell DE IH 2007/09/22 call on DEERE & CO at $140.00 1 $3.50 $3.20 $320.00 -8.57% -$30.00
Sell UPA KI 2007/11/17 call on PANERA BREAD CO CL A at $45.00 1 $4.90 $4.50 $450.00 -8.16% -$40.00
Sell JCP HP 2007/08/18 call on J.C. PENNEY CO INC at $80.00 2 $1.15 $0.85 $170.00 -26.09% -$60.00
Sell GSK KJ 2007/11/17 call on GLAXOSMITHKLINE PLC at $50.00 5 $4.70 $4.20 $2,100.00 -10.64% -$250.00
Sell RQW HK 2007/08/18 call on T. ROWE PRICE GROUP at $55.00 4 $0.95 $1.15 $460.00 21.05% $80.00
Total: $16,990.00 -4.47 % ($760.00)

[Airelon]

That's the trick of options.

I've personally never traded stock options. I keep my options purchases to the futures arena. But when buying an option, it's important to remember that you are not only buying an option for that strike price (the delta).

You're also paying for the historical volatility that market has shown. (Vega)

You're also paying for the time decay that's left on the option. (Theta)

You're also paying for a the sensitivity to changes in the free interest rate (Rho )

You're also paying for how sensitive that delta is (Gamma)

And of course, demand for the options can also help that price along. So in actuality, the delta (Strike price) is just a small part of that option. There's an actual formula to how it's figured (Black Scholes formula). Theoretically, although two factors are impacted by the market price, the other factors can overcome them, and actually make an option worth more although than the market is moving away from the strike price. Looks like you found just such situations.

I've actually had times where I was 100% correct as to market direction on the option direction, but I was off on all the other factors, so I didn't end up making any money (Broke even). It's what led me to developing my own tool to measure when an increase in volatility might arise. There are traders out there who just trade the volatility of markets, as this has such an impact on option prices.