What is IV?

taowave said:
For day trading with no overnight risk,and trading a single option, I would argue(strongly) that the highest Delta is the way to go...Ill take Delta/Theta over Gamma/Theta :)

IMHO,it comes down to the second part of the question i asked .Are you more inclined to be a backspreader or a ratio writer...Simply put,will you employ leverage and how aggressively

If you are position sizing and willing to risk X dollars,the real question is do you buy 1 delta 1 option vs 2 delta .50 options vs 3 delta .33 options ,etc...

Or do you simply take X dollars and buy as much of the option strike you are inclined to..

Reardless,if you are day trading 1 lots,you buy the highest Delta..
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ondafringe said:
If you are bullish, and looking at where the SPY Wednesday options are now, that would mean buying the 435 call's high delta, instead of the 442 call's high gamma, and paying over 5x the premium, so one 435 call vs five 442 calls?
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Still parsing this... and just thinking out loud.

BTW, I indicated SPY Wednesday in my previous post, but I meant to say SPY Monday expiry.

So the coming SPY Monday 435 Calls 0.99 Delta vs the 442 Call's 0.43 Delta:

Pertaining to what you are calling the "real question," it sounds like 1 x 435 Call would/should be equal to 2.5 x 442 Calls. But since you are getting 5 x 442 vs 1 x 435 for the same money, from my limited understanding, I would say the 442s are preferable because you are getting more bang for the buck.
 
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taowave said:
For day trading with no overnight risk,and trading a single option, I would argue(strongly) that the highest Delta is the way to go...Ill take Delta/Theta over Gamma/Theta :)

IMHO,it comes down to the second part of the question i asked .Are you more inclined to be a backspreader or a ratio writer...Simply put,will you employ leverage and how aggressively

If you are position sizing and willing to risk X dollars,the real question is do you buy 1 delta 1 option vs 2 delta .50 options vs 3 delta .33 options ,etc...

Or do you simply take X dollars and buy as much of the option strike you are inclined to..

Reardless,if you are day trading 1 lots,you buy the highest Delta..
More...
Hm... Thb, I don't see any reason to use options if you're after delta. In this case, just trade the stock.
If you're after convexity, use options and you want max. gamma without paying too much theta for that.

Regarding risk, I'd use a delta number plus max $ ammount to buy the highest gamma/theta option.
But what do I know, daytrading options is probably not the best idea when you look at the risk premium aka. IV over RV.
 
MrMuppet said:
That's easy to answer.
For directional trading you want to use the option that provides the highest possible gamma per unit of theta. IV is negligible in very short term options, they are gamma plays for the most part.

As short term options IV is heavily skewed, you will find that these options are almost always the ATMs.
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For this process, should I trust more on the real ATM rather than leaning on the 50D? (still figuring how to quickly discern the highest gamma per unit of theta).

And thank you for sharing such valuable insitghts.
 
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