A Good Option is to Buy at Delta = 1

This will seem an obvious point to many, but going long or short with options is best done when delta is at or near 1.  It’s here when the rate of price increase starts to pick up dramatically, after a relatively slow rise pre-delta.  Being so far out of the money usually makes little sense, unless the market seriously undervalues such a position.  The risk clearly isn’t worth the reward.  See the figure I borrowed below:


Published in: on December 28, 2009 at 1:43 am  Leave a Comment  
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