You mentioned 'delta' the other day re buying a call. What's a delta? (July 19, 2001)
Delta is related to options. It is a measure of how much an option's price will move based on how much the underlying stock moves. For instance, if an option's delta is 50, if the stock moves up $1, the option will move up 50 cents ($1 x 0.50). Thus, we prefer higher deltas as they give us more movement in our option based on the stocks' movement. It can cost us more for higher deltas (usually deeper in the money) and thus we have to balance the return versus the relative safety of buying in the money options. Still, we prefer to buy in the money options with stronger deltas than out of the money options that are all time value and volatility and no intrinsic value.
|Previous Page||Next Page|