Call and put options don’t move independent of each other. In many ways, they are two sides of the same coin. In fact, the total price of an at the money call and an at the money put is a good estimate of how far traders think that an underlying stock will move before expiration.

[VIDEO] Projecting Options Prices

The total put and call price can be added to the current stock price to find an estimate for upside potential and can be subtracted from the current stock price to find an estimate for downside potential.

If the total cost of the at the money call and put is $3.00 ($1.50 each) then the market is not expected to move beyond $3.00 above or below the stock’s current price before expiration. That can give you some insight into how far you expect the market to move in the short term.

You can use this information to make your own estimates about what strike prices you want to sell as an options writer, or to assess the probability of a long call position becoming profitable by expiration.