say 2 years from expiration. 15% volatility. 1% risk free rate. 0 Dividend. Lets go.
Personally i said 30% from strike price. what yall think.
I only sell my positions when they reach 1,000% gains. Which is usually like every 3 weeks.
assuming you are talking about plain vanilla put options, and assuming all the conditions for Black-Scholes holds, then i get close to 20% from strike price (around 18.6% to be more precise)
in theory, you will want to exercise if you get more by exercising early, that is, if K - S exceeds the price of the black-scholes put.
i used K = 100 and set S from 1 to 100 with r = .01, sigma = .15, div = 0, T = 2
a simple plot suggests a price of slightly above 80
zooming in, and we can see that the price is at around 81.4
that is, it would be optimal to early-exercise as long as the underlying asset price does not exceed around 81.4. unless, of course, i made a mistake somewhere.
Yea I was thinking of something similar where I looked at premium divided by net proceeds if exercised. Then made sure the annualized cagr is about 4 percent. So 8 percent premium given up for 2 years. At what you suggested it’s like a 14 percent discount or 7 percent cagr. Which imo is too high a premium given up but then again it gives you the ability to diverisify so I guess it depends.