High premium vs Low premium calls.

[GotherL]

Are there any advantages of buying closer to the money when you've to pay more for premium? I only wanna invest a small amount of my portfolio so I don't wanna buy at high premium prices. To me, it just seems more ideal to purchase calls further away from the money as possible where the premium is much lower.

 

[Option_Attack]

What is your opinion on what will happen to your stock? How far will it move? When? Closer to the money, higher Delta. Probably the best thing is to not buy calls at all. Just keep your stock long term. Add to it on drops. If it is a good stock, in this kind of market, you have a very good chance of nice gains, and you get divs. Over a decent time interval, anyway.

To approach option trading from an investor's perspective you might check out this book:

 

[Scataphagos]

To me, it just seems more ideal to purchase calls farther away from the money as possible where the premium is much lower.

However close your call is to ITM, the sellers have evaluated it and have concluded, "not likely to move that far within the time". As a buyer, you're saying/betting... "sellers have underestimated the strength of the issue and have mispriced it too low."

Sellers get paid immediately. The buyer's case needs to be proven. Consider how many times (percentage) the option expires worthless. That is, the seller was the one who was correct.

IOW... buying calls/puts is rarely a bargain.

 

[traider]

However close your call is to ITM, the sellers have evaluated it and have concluded, "not likely to move that far within the time". As a buyer, you're saying/betting... "sellers have underestimated the strength of the issue and have mispriced it too low."

Sellers get paid immediately. The buyer's case needs to be proven. Consider how many times (percentage) the option expires worthless. That is, the seller was the one who was correct.

IOW... buying calls/puts is rarely a bargain.

If this was true, all traders should be selling options hands over fist.

 

[Scataphagos]

If this was true, all traders should be selling options hands over fist.

Statistically that's how it works.... except when you sell them naked. That's like picking up dimes in front of a steam roller.

 

[taowave]

Not true..
If you do not apply leverage,ATM put selling performed well relative to benchmarks.

There are several academic research reports on the subject.

You could also run simulations with a backtester like Orats and see how DTE and strike affect returns

Statistically that's how it works.... except when you sell them naked. That's like picking up dimes in front of a steam roller.

 

[taowave]

Check out Orats and run backtests on various stocks/portfolios with varying expirys and DTE ...

Keep in mind buying one ATM call vs buying one 110 of spot call may not be a fair comparison.

I would compare equal delta's and or equal dollars as well..

As the above is essentially backspreading,you could add an implied vol filter...

Are there any advantages of buying closer to the money when you've to pay more for premium? I only wanna invest a small amount of my portfolio so I don't wanna buy at high premium prices. To me, it just seems more ideal to purchase calls further away from the money as possible where the premium is much lower.