If Intrinsic Value = Option Price Why Buy OTM?

[tsznecki]

This is another example of what i was thinking:
- underlying trading for $10
- $9 Call Costs $1.02, Delta 0.95
- $11 Call Costs $0.10, Delta 0.1
- You have basically only paid $0.02 for the $9 Call (considering $1 is intrinsic) which a much higher probability of it expiring ITM.
- You paid $0.10 for the $11 call with much lower probability of it expiring ITM.

Unrealistic example. No ticker at $10 has the $11 call at delta 0.1.

 

[vegamedic]

Unrealistic example. No ticker at $10 has the $11 call at delta 0.1.

MBI is trading right wrapped around $10 with the Oct 11 call showing a delta of ~0.1 (data from yesterday's close)

never say never