The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone, Kirk here again and welcome back to the daily call. On today’s call, we’re going to talk about when is an options contract expensive or cheap. This is all relative. That’s the first thing you have to understand about being expensive or cheap. It’s all relativity. I use the real estate analogy all the time when it comes to option pricing. But let’s say a one bedroom apartment in New York, if I told you that that piece of real estate was priced at $25,000, you would say, “Holy crap! That is insanely cheap!” Because houses and apartments in New York are really expensive, so if you find one just randomly for $25,000, not that it would happen, but just to prove the point, you would say that that’s insanely cheap. Now, in my area where I live, in Pennsylvania, if you find a house for $25,000, it’s not necessarily cheap, but it’s not expensive either. It might be the middle of the road for some areas because we just live in a low cost blue collar area and that whole concept of being cheap or expensive