While Ive played with selling options a lot, I rarely buy them. Today I bought a put on NVDA to hedge and it occurred to me. I don't know if it would have been more profitable to have bought something closer to the 125 share price, or if buying the 120 put was better because it was cheaper. Does anyone have any data on this? This particular contract expires this friday the 30th. But I also am curious if I were to buy 3 weeks out, if it is a better move to buy an option that may never make it there, but because it was so cheap, your P&L will be better.
UPDATE: my biggest question would be how ITM options react. Are they at the value as if the contract were exercised right then and there, and only OTM options suffer from time decay? Would an ITM contract be worth different if one was for next week and another was for a month from then?
Just out of the money, or far out of the money
byu/Buyhighselllow225 inoptions
Posted by Buyhighselllow225
5 Comments
By definition cheaper means chances of failure higher. If it hits you hit big but you will miss a lot. Many many more times than you hit. That’s literally why they are priced that way.
Cheaper isn’t better in my opinion. I would rather buy an ATM contract and absorb more delta in my favor than get an OTM contract where I gain .10 if that in delta in my favor vs .50-.60 delta in my favor
In your case, the contracts were juiced because of IV being high. After ER that IV is going to plummet and so will the contract values
My simple rule is buy 80 delta and sell 30 delta.
You play them differently.
use optionstrat site