Option Question about Delta

bc1 · Jan 11, 2012

Quote from FrankSlaughtery:

some of us have even less money than that - can we have virtual coffee instead like type of coffee in goog and look at images maybe?

You can join in now. I'm at the Maxwell House sipping their brew as we speak. Virtual gots to taste better.

atticus · Jan 11, 2012

I just had a capp made by my Tassimo. Highly recommended and world's better than the K-Cup machines.

atticus · Jan 11, 2012

Quote from bwolinsky:

That's generally not what delta would be used for, and a gross misexample. There are extremely few stocks even with options if they're less, and, as far as that's concerned, it will work for any stock above that level.

So don't use delta for an ATM $3-strike either? How about a $5 strike?

newwurldmn · Jan 11, 2012

Quote from atticus:

I just had a capp made by my Tassimo. Highly recommended and world's better than the K-Cup machines.

K-Cup's suck and are crazy expensive.
I'm not a coffee connesuir. Folgers instant for me!

atticus · Jan 11, 2012

Quote from newwurldmn:

K-Cup's suck and are crazy expensive.
I'm not a coffee connesuir. Folgers instant for me!

The Tassimo cappuccino (two discs) are $1/cup, so not cheap. Roughly equivalent to the SBUX capp, w/o the bitterness. The Tassimo has a barcode reader and adjusts to the temp and pressure.

I've never had instant, so I'll have to try it some day.

atticus · Jan 11, 2012

Quote from bwolinsky:

I've not seen any case where the move wasn't represented well by this use of the delta approximation.

It's not meant to predict ITM probability, but is the dollar move the option will move for a $1 change in the underlying.

The CFA is not wrong, and there is no $0.50 delta on a $1 stock. That's generally not what delta would be used for, and a gross misexample. There are extremely few stocks even with options if they're less, and, as far as that's concerned, it will work for any stock above that level.

Now you done done it!1

newwurldmn · Jan 11, 2012

Quote from atticus:

The Tassimo cappuccino (two discs) are $1/cup, so not cheap. Roughly equivalent to the SBUX capp, w/o the bitterness. The Tassimo has a barcode reader and adjusts to the temp and pressure.

I've never had instant, so I'll have to try it some day.

That's pretty high tech. I don't think the K-cups are very high tech.

The nicest two things about instant coffee are it's cheap (like 4 cents/cup) and it's fast (hot water, add coffee, stir, milk, sugar, done).

bwolinsky · Jan 11, 2012

Quote from sle:

hmm, CFA you say? ... you got a stock priced at $20 and a vanilla european call struck at $20 ... the stock pays a scheduled dividend of $1 (as per CFA curriculum) and thus moves down by $1 to 19$ ... what do you think the delta of the call is on the day before div? what is it on the ex-div date? how much does the price of the option move on the ex-div date?

Since there is no European option you have an example of this for, I don't feel like answering.

bwolinsky · Jan 11, 2012

Quote from atticus:

So don't use delta for an ATM $3-strike either? How about a $5 strike?

I don't know what you mean by "don't use delta." It is not a probability, so in that sense it should not be used to predict ITM probability.

Delta will tell you approximately how much the option will move for a $1 change in underlying...I think I've said this five times already.

Martinghoul · Jan 11, 2012

Quote from bwolinsky:
Since there is no European option you have an example of this for, I don't feel like answering.

The CFA Institute would not be happy with this sort of talk right here...