For this segment of Options Jive, Tom and Tony discuss what we usefor and how truly accurate it has been. Delta is one of our most important for its ability to estimate the likelihood of a stock reaching a certain price.
We use Delta when pickingprice 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? Tune in to find out!