When investors have high confidence of the upward trend of stock prices in a certain period of time in the future, they can buy call options to obtain greater returns. The following describes the options for different time levels.
- Intraday traders make use of small-level fluctuations in stock prices to earn profits, and should choose options with high delta values; if the delta value is too low, stock price fluctuations cannot bring profit to day traders.
- Usually short-term (1-2 week expiry date) in-the-money options have high delta values. When the delta value is higher than 0.6, it can respond quickly to small stock price fluctuations.
- When investors determine the upward trend of the underlying object in the short term (1-2 weeks), they will also choose the high delta option used by intraday traders. But the expiration date can be appropriately extended to reduce risk of stock prices falling.
- When investors extend the trading cycle, in mid-line trading, options with low delta values should be used, that is, options with a longer expiration date.
- Investors speculate that the stock price will increase significantly in a few weeks and months. At this time, buying an at-the-money option with low delta value can achieve better returns
- Under normal circumstances, the risk of buying out-of-the-money options is high, but when the time period is very long (greater than 9 months or more), you can consider options with slightly out-of-the-money values, and exchange lower premiums for larger returns.