Market Mindset

Delta/Gamma & Extrinsic Value

Market Mindset

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Mike & Nick take an interesting approach to explain delta and gamma in this episode and talk about it through the lens of extrinsic value. They explain that the further out in time you go, the less sensitive the option price is to changes in the stock price, simply because you have more extrinsic value to lose as the option slides ITM and gains intrinsic value. The closer to expiration you go, the more sensitive the option is to changes in the stock price, because there is less extrinsic value to offset the intrinsic value gain.

Tune in for a great show!

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