Today, I wanted to dive in to some reader mail:
Hey Steve,
I had been “taught” that if you wanted to be straight bullish or bearish a stock and use options for leverage then deep in the money was the way to go since the delta was near 100. You seem to vastly prefer slightly out of the money strikes for your straight plays. Can you talk about the logic behind this? Also, is this a long-term preference or is it somehow linked to current market conditions? – Brian C.
This is a great question and hits on some of the variables that go into choosing a strike or a strategy. The main inputs for deciding what approach to take is price and time. That is, what size or percentage move do you expect in the underlying stock and in what time frame do you expect that to happen…
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