From the February 01, 2012 issue of Futures Magazine • Subscribe!

How to value equities using commodity futures options

Valero also is more valuable in terms of option pricing when compared with several energy equities (BP, Exxon Mobil and Chevron). The chart “Calls on energy equities” (below) again places Valero considerably higher than the other three call price curves as standardized by dividing the underlying stock and option prices by the strike price. The larger expected future price variability of Valero may be a function of its product mix, which includes ethanol and heating oil, or simply traders’ assessment of future stock price trends.

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