Ok, delta is how much an option moves relative to the stock. An at-the-money call usually has about a delta of 0.50, which means the option will move 0.50 point to every 1 point move in the stock.
Gamma is the amount delta will change for every 1 point move in the stock. If our at-the-money call has a gamma of 0.05 and the stock moves up a point, then the delta will move from 0.50 to 0.55 (Delta+Gamma). If the stock moves down a point the delta moves from 0.50 to 0.45 (Delta-Gamma).
(If you are going to trade options, stop by your local bookstore and pickup a book on options, to get a better understanding of these concepts)
Ok, now, i like to buy in-the-money options, and for the QQQ, ones that have $1 of time premuim or less. The higher the time premuim, the more likely i'm going to get screwed by the market makers.
For the puts i bought on monday, they were Sept 29s, at $4, which is $1 in time premuim. The delta is about .75 last i checked.
I've traded different time-lengths (1 months, 3 months, 6 months and 1 year) options, and 6 month options are good balance, between cost (how deep in the money i have to go to buy an option with a $1 of premium, or less), premium decay, which is mild compared with options with 1 to 2 months. |
