One of those things that no one teaches you, but you just happen to learn on your own.
One day I was looking at the options chain for QQQ at a certain expiration. I normally never bought cheap options and I accidentally scrolled down to them. I noticed that there was a hell of a lot of open interest right around the 9 delta spot. Didn't think much of it except that I kept noticing the same thing over and over again. I decided to find out WHY people would even dream of buying such a cheap, pitiful option so I bought one. I also bought a position of an ATM option to compare. The FACT of the matter was that the low delta option had a higher profit % than my higher delta option...by a long shot! I tested my theory over and over again with the same results.
Now I buy cheap options out of necessity, because my account is small, but even as my account size grows I'll still buy near 9 delta options because they have a LOT higher profit % AND for the same amount of cash I'm able to buy more options at that level to scale out with. When you want to scale out of a 4.00 option position there is no scaling out....whatever point you decide to close you are out! Take that same 4.00 and split it up into ten 0.40 options....you haven't spent a dime more than the ONE 4.00 option PLUS you have TEN options to scale out at different price points with and also receive a higher profit percentage at that low delta.
The only way to test that theory was to test it and I did. Now I'm a believer in 9 delta point options (9-17 or so). Look at the options chain. Why are there so many options way down in the low delta areas?
BAC is up nicely. Curious how far you all let it ride? My expectations for most of these were around 10%, but have been 25+% lately. What is the standard deviation? Don't want to be greedy; should I expect 50+% with options?
BOT +1 .XLF210618C38
BOT +1 .XLF210618C39
BOT +1 .IWM210618C305
Why so OTM?
I have a small account so I buy cheap options to keep my capital allocations per trade within reasonable bounds.
Thanks, I bought a little of each and made out well. How do you screen for this?
"screen?"
How did you find out about those options? Did you research or just had an idea?
One of those things that no one teaches you, but you just happen to learn on your own.
One day I was looking at the options chain for QQQ at a certain expiration. I normally never bought cheap options and I accidentally scrolled down to them. I noticed that there was a hell of a lot of open interest right around the 9 delta spot. Didn't think much of it except that I kept noticing the same thing over and over again. I decided to find out WHY people would even dream of buying such a cheap, pitiful option so I bought one. I also bought a position of an ATM option to compare. The FACT of the matter was that the low delta option had a higher profit % than my higher delta option...by a long shot! I tested my theory over and over again with the same results.
Now I buy cheap options out of necessity, because my account is small, but even as my account size grows I'll still buy near 9 delta options because they have a LOT higher profit % AND for the same amount of cash I'm able to buy more options at that level to scale out with. When you want to scale out of a 4.00 option position there is no scaling out....whatever point you decide to close you are out! Take that same 4.00 and split it up into ten 0.40 options....you haven't spent a dime more than the ONE 4.00 option PLUS you have TEN options to scale out at different price points with and also receive a higher profit percentage at that low delta.
The only way to test that theory was to test it and I did. Now I'm a believer in 9 delta point options (9-17 or so). Look at the options chain. Why are there so many options way down in the low delta areas?
Good question Chris.
Those tickers, and others pop up in discussion here pretty often
Got in a Lowe’s 16Jul21C170 for $15. Anybody get a better deal? Price action was ramping when Greg’s trade was posting
Same option same $$$ , I bought
I also bought the HD 16Jun21 275 call
Any lions still holding June 21. Wmt call options??? I'm loosing $$$
BAC is up nicely. Curious how far you all let it ride? My expectations for most of these were around 10%, but have been 25+% lately. What is the standard deviation? Don't want to be greedy; should I expect 50+% with options?
Hi Greg, do u have specific companies in mind as before?