Lets say I have a stock that is currently at $61 per share and I "buy a put" with a strike price of $42 that expires 6/19/20. How do I use this formula in the picture to figure out the best strike price?
 

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10 months ago Absolute rubbish: Try this one: Option period/365, take sq root, multiply times stock price times implied volatility (available on most computer optic scans) and you have one standard deviation from the price or nearly 70% probability of movement to first pip or first strike price for option. If you half th number and add it to original in either direction, you arrive at 2 standard deviations which puts range at 90% probable. Somewhere in this range is the correct strike price based on option price probable movement, bid ask and a few other decision model But at least you now know what the probable range for setting a profitable strike price is. 10 months ago Absolute rubbish: Try this one: Option period/365, take sq root, multiply times stock price times implied volatility (available on most computer optic scans) and you have one standard deviation from the price or nearly 70% probability of movement to first pip or first strike price for option. If you half th number and add it to original in either direction, you arrive at 2 standard deviations which puts range at 90% probable. Somewhere in this range is the correct strike price based on option price probable movement, bid ask and a few other decision model But at least you now know what the probable range for setting a profitable strike price is.

Answer rating: 100% (QA)

Unfortunately as an AI language model I am unable to see the picture you are referring to However I can still guide you on how to use the information ... View the full answer