Price variance call and put options?

Question

I need to know cost of placing a call on a stock trading at 47.00 per share and another at 6.80 per share.

My question would be is the cost of one call option the same for both shares. I thought the 47.00 stock might be 200.00, and the 6.80 stock would be less. What is the correct answer?

Appreciate the help

C&G

Answer 1

<<<My question would be is the cost of one call option the same for both shares.>>>

If they happened to be the same price it would be a pure coincidence. It is very unlikely the prices would be the same.

<<<I thought the 47.00 stock might be 200.00, and the 6.80 stock would be less. What is the correct answer?>>>

The price of a stock call option depends upon several factors:

o The stock price

o The strike price

o The time until expiration

o The implied volatility

o The risk free interest rate

o The amount of any dividends expected prior to expiration

Sometimes other factors are involved, such as when a company has agreed to be acquired for a fixed cash payment per share.