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Strategies & Market Trends : Options
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To: Poet who wrote (6065)4/5/2000 10:11:00 PM
From: the options strategist  Read Replies (1) of 8096
 
Hi Poet, for anyone interested. Delta: is the amount by which an option's price will change for a corresponding one pt. change in price by the underlying entity. For a call option example, the delta is the amount by which the call will increase or decrease in price if the underlying stock moves by 1 pt.

Eaample: If ABC were 50 and ABC july 40 call were 10 1/8, the call would change in price by nearly 1 pt if ABC moved by 1 pt. up or down.

A deep out of money call has a delta of nearly zero. If ABC were 30 the july 40 call might sell for 1/4 pt.

If ABC moved by one pt, the call prem would change very little. If the underlying is an at the money strike, the deltA is generally between 1/2 and 5/8 of a pt.

The delta mentioned abov may be somewhat different for very long term calls.

This is why many traders buy deep in the money so the option can move like the stock, up or down.

Been out of town but still want to get with you. Will PM you when i get settled.

jj
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