Comment on The Option Greeks (Delta) Part 1

RS commented on 01 Feb 2018, 08:57 AM

Hi Karthik – Am new to options and trying to learn using zerodha. Must say it is awesome tutorial. I have a query . in the below example which you have given
“Call Option 1 has a delta of 0.05, Call Option 2 has a delta of 0.2
Now the question is, which option will you buy?
Let us do some math to answer this –
Change in underlying = 100 points, Call option 1 Delta = 0.05,Change in premium for call option 1 = 100 * 0.05, = 5
Call option 2 Delta = 0.2,Change in premium for call option 2 = 100 * 0.2,= 20
As you can see the same 100 point move in the underlying has different effects on different options. In this case clearly the trader would be better off buying Call Option 2. ”
I thought Option 1 is better as the trader will pay lower premium for the same strike price ? why is option 2 better ?

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