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Delta (Part 2)

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The previous   section   gave you a sneak peek into the first option Greek – the Delta. Besides dis- cussing the delta, there was another hidden agenda in the previous chapter – to set you on a ‘model thinking’ path. Let me explain what I mean by this – the previous chapter opened up a new window to evaluate options. The window threw open diļ¬€erent option trading perspectives – hopefully you now no longer think about options in a one-dimensional perspective. For instance going forward if you have view on markets (bullish for example) you may not strate gize your trade this way – ‘My view is bullish, therefore it makes sense to either buy a call option or collect premium by selling a put option’. Rather you may strategize this way – “My view is bullish as I expect the market to move by 40 points, therefore it makes sense to buy an option which has a delta of 0.5 or more a...