When buying calls, how would I find the delta for a transaction?

Question

I have tried several search engines but I have received no answer.

Answer 1

I'm presuming you know what delta is and how to use it, else, be careful.

Ok, here's the easiest way. Open a brokerage account with a good broker.

Most brokers such as optionsxpress, thinkorswim, interactivebrokers, and so forth have great options valuation tools to give you all the option "greeks" such as delta, theta, etc. And many of them also have good option scenario tools as well to run hypothetical analysis. Other brokerages such as E*Trade, ameritrade, and Scotttrade have some limited abilities as well. Stay away from firms like Fidelity, etc who just want your money and pretend to have tools. They're really not that good.

That said, if you don't want to open a new account, just look at the options chart/chain (should be available from EVERY broker that you deal with). Here's how:

See how much the price of the option moves from At the money to In the money. Take that difference and divide it by the difference in strike prices for an approx delta.

So if the stock were at $40 and the $40 option were $2 and the $35 option were $6. Then the delta would be approx ($6-2)/(40-35) = $4/$5 or approx 0.80.

You can do this with most of the options on the chart.

Hope that helps!

Answer 2

That's why most people who trade options get an option evaluation program. You are at a severe disadvantage witout one. And you are at a severe disadvantage if you buy calls with low liquidity, high spreads, or during a time of high volatility. You are at a severe disadvantage if the volatility decreases by the time you want to unload your long call. You are at a severe disadvantage if you buy only one of the 80% of the calls that will expire worthless. How much of the odds do you wish to be disadvanted by? At least go to Vegas or buy a stock where you might have decent odds, or heaven forbid, that you might put the odds in your favor elsewhere.

It's a game for far advanced people with deep pockets, deep knowledge, whom are deeply rooted in experience and are doing things and counting on things that the novice can't even imagine. These people set the gazillion traps that await you. Not only are the fundamentals against you, unless you are an advanced trader, the technicals will get you.

Unless you are willing to devote your life to options, like they are, the little guy doesn't stand a chance. This is not investing or "Buy and Hope," like in stocks. This is precision trading. You would do well to look elsewhere to make a profit.

Re-evaluate what it is you're trying to do. There are ways to reduce risk w/o quadrupling the odds that you will lose it all, and still add leverage. But it ain't with options.

Here's the Yahoo options page:
http://biz.yahoo.com/opt/

Rots a ruck.