When investors are certain of the downward trend of stock prices in a certain period of time in the future, they can buy put 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 trend of the underlying object in the short term (1-2 weeks), usually in this case, they will also choose the high delta option used by day traders, but the expiration date can be appropriately extended to reduce risk.
- Extending the trading cycle, in mid-line trading, options with low delta values should be used, that is, options with a longer expiration date.
- When Investors speculate that the stock price will fall sharply in a few weeks and months. At this time, buying at-the-money low-delta-value options can achieve better returns.
- Under normal circumstances, buying out-of-the-money options is risky, but when the time period is very long (greater than 9 months or more), you can consider options with slightly out-of-the-money value, in exchange for a lower premium