Options Jive

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How Accurate is Delta?

Options Jive

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

For this segment of Options Jive, Tom and Tony discuss what we use delta for and how truly accurate it has been. Delta is one of our most important Greeks for its ability to estimate the likelihood of a stock reaching a certain price.

We use Delta when picking strike price for our trades because of delta’s characteristic of pricing the probability of that strike expiring in-the-money (ITM). Given the bull market over the last several years, it’s no surprise that delta is overstated to the downside and understated to the upside. Although, when we factor in the premium, we see that no option understated the amount of movement in the market.

So how should this influence our order entry? Tune in to find out!

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