In or Out of the Money

[nonprophet]

Quote from timbo:

What ever floats your boat. At least leave the Mexican out this.

Puts protect against Mexicans. Period.

 

[timbo]

Great, I'll tell the folks at the rio grand.

 

[BoneFishGA]

Quote from ess1096:

That's what draws most option virgins into the options game. Lottery ticket mentality. Yet MOST lose money buying OTM options. I'm speaking from experience. I lost more cash buying OTM calls than any other "strategy" I've tried.

You read my mind, thats exactly what I was thinking. Watch that $0.20 call jump up 5 or 600%.

Quote from ess1096:
When I scan an option chain to open a position I never look at the option "price" column any more, I scan down the "Delta" column first. And of course liquidity goes without saying.

PS: By "scan" I mean visually, the old fashioned way. [/B]

Thanks, maybe I'm starting to learn something here.

 

[insaneinvestor]

Quote from commiebat:

What a load of nonsense. Now I see where you got your name.

It should be obvious to you that the raw price per contract is no indication of anything, since a $1 option would be a 50 cent option if the stock split 2:1, yet it would have exactly the same chance of finishing ITM/OTM.

Also, unsurprisingly, a $4 option does not have a 400% chance of finishing in the money.

The statistical probability that an option will expire in the money is better known as "delta".

As I said... "not everyone will agree".

It was a general statement to show why you should not buy an option just because it is "cheap".

If the "raw price of an option is no indication of anything" like you just said... we would not be here talking about this would we?

I see where you get your name, everything being equal in your world.

 

[spindr0]

It was a general statement to show why you should not buy an option just because it is "cheap".

If the "raw price of an option is no indication of anything" like you just said... we would not be here talking about this would we?

I see where you get your name, everything being equal in your world.

Actually, you made a very specific statement. Why not back your statement up with something more specific rather than starting a pissing contest?

Although commie_bat's stock split example was a bit cryptic, with an understanding of option pricing, it would be clear what he was suggesting. You might consider it further.